Holcim promises a bright future after demerger
Published: Monday, Jan 29th 2024, 14:20
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Holcim promises a bright future after the split announced the day before: The separated North American business will be a rock star, said Holcim President Jan Jenisch. The rest of Holcim would be a champion. However, there were no great storms of enthusiasm on the stock exchange on Monday.
On Sunday (yesterday), the long-established Swiss company announced the biggest change since the takeover of its French competitor Lafarge in 2015. At that time, Holcim had become by far the largest cement and building materials manufacturer in the world.
The North American business is to be separated from Holcim next year and floated on the US stock exchange as a fully independent company. Jenisch said in several telephone conferences on Monday that the split was necessary in order to fully exploit the potential and get off to a flying start.
"The business has become too big to run as a subsidiary," the German had already said in an interview with the news agency AWP on Sunday. "We have practically doubled the business in the last four years." It is the largest cement manufacturer in North America and the number 3 in the roofing business. In aggregates and ready-mix concrete, the Group is in 5th place.
Rockstar in North America
The North American business, with sales of over 11 billion US dollars and an operating profit (EBIT) of 2 billion dollars, will be a rock star company, said Jenisch. This will benefit from the US government's various economic and infrastructure programs.
Re-industrialization is taking place in the USA: Car, household appliance and electronics manufacturers are relocating production back to the USA. Holcim is receiving many orders from companies that are building factories. In addition, orders for infrastructure construction would also start this year.
Even the election of Donald Trump as US president is no cause for concern. The current president, Joe Biden, is pursuing the same economic policy as his predecessor: Biden has passed Trump's gigantic support programs for companies into law. As different as Biden and Trump are in style, they are pulling in the same direction in terms of economic policy, said Jenisch.
By 2030, the new company is expected to grow to a turnover of over 20 billion dollars in the USA. EBIT is expected to increase to over 5 billion dollars.
Holcim alone also a champion
Holcim alone is also a champion with annual sales of CHF 17 billion and EBIT of over CHF 2.7 billion. In Europe, the company will benefit from decarbonization and the trend towards sustainability as a result of the EU's "Green Deal".
The growth engine of the rest of Holcim should become Latin America, said Jenisch. By 2030, Holcim's turnover alone should increase to 22 billion Swiss francs and EBIT to over 4 billion Swiss francs.
Rather restrained share reaction
Despite these prospects, there was only muted applause from investors. The share started Monday's trading on the Swiss stock exchange with a rise of 6.7 percent. However, the price then crumbled and was still up 4.2 percent at 66.90 Swiss francs in the early afternoon. Holcim now has a market capitalization of 38.7 billion Swiss francs.
This makes the Group appear undervalued: A market capitalization of 30 billion dollars is realistic for the North American business alone, said Group CEO Jenisch.
ZKB analyst Martin Hüsler calculates a value of CHF 51 to 59 billion for the Group as a whole. After deducting net debt, this would result in a valuation range for the share of around 75 to 88 francs, Hüsler estimated. The rest of Holcim, excluding the North American business, has an enterprise value of 21 to 25 billion.
Even after the spin-off, Holcim will remain in the leading index of the Swiss stock exchange SMI, said Jenisch. And the distribution to shareholders will not be reduced.
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