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Cost inflation makes LafargeHolcim cut full-year earnings forecast

The logo of LafargeHolcim, the world's largest cement maker, is seen at its headquarters in Zurich, Switzerland March 2, 2017. REUTERS/Arnd Wiegmann/Files

By John Revill

ZURICH (Reuters) - The world's largest cement maker LafargeHolcim cut its profit expectations for 2018 on Friday, blaming rising energy and other costs.

The Swiss company said it was seeing higher fuel prices to run its cement plants and transport costs due to a shortage of delivery truck drivers as well as more expensive packaging.

"We are have very steep cost inflation," Chief Executive Jan Jenisch told journalists on a call, "one of the steepest I have seen for many years.

"The world economy is running at quite a strong capacity level so you see price increases in a lot of areas."

The problems of rising costs for the building materials sector were highlighted last week when LafargeHolcim's German rival HeidelbergCement trimmed its profit guidance for 2018, sending its shares down.

HeidelbergCement cited higher energy costs and persistent bad weather in the United States for cutting its outlook.

LafargeHolcim said on Friday it now expects recurring earnings before interest, tax, depreciation and amortisation to increase by 3 to 5 percent this year, down from its previous view of at least 5 percent.

Jenisch declined to quantify the precise inflation impact on LafargeHolcim, but said the company was tackling the issue by raising prices, boosting efficiency and increasing sales volumes.

"The good news is that we saw this coming, and took all the measures to counterbalance this inflation," Jenisch said, saying the company was able to increase cement prices by 1 percent during the third quarter to compensate.

Still, Jenisch, who took over a year after the company admitted funding armed groups in Syria to help keep a plant open, was upbeat about sales prospects.

The company increased its full-year outlook to see sales growing 4 to 6 percent, up from its previous expectation of 3 to 5 percent.

During the third quarter, LafargeHolcim reported a 8.1 percent increase in recurring EBITDA to 1.87 billion Swiss francs ($1.87 billion), beating the average estimate of 1.78 billion francs in a Reuters poll of analysts.

Net sales increased 5.8 percent on a like-for-like basis to 7.36 billion francs, slightly ahead of expectations. The company said it expected sales growth to continue in the fourth quarter, helped by a continued upturn in North America and strong markets in Europe.

The company's stock, which has lost 23 percent this year, reacted positively to the update, opening 4.6 percent higher before paring some gains.

"The lower profit guidance was not a surprise after what HeidelbergCement said last week about higher costs, so I don't think LafargeHolcim's stock will be badly affected," said Zuercher Kantonalbank analyst Martin Huesler.

($1 = 1.0005 Swiss francs)

(Reporting by John Revill; Editing by Michael Shields and David Evans)