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Appetite for construction helping cement maker LafargeHolcim weather downturn

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

By John Revill

ZURICH (Reuters) - LafargeHolcim, the world's largest cement maker, forecast sales growth of 3 to 5 percent in 2019, as engineering projects and demand for new housing fuelled by low interest rates shield the construction industry from economic downturn.

Chief Executive Jan Jenisch said he expected the upswing LafargeHolcim enjoyed in the second half of 2018 to continue into 2019.

"In building materials we are in a very resilient market segment, so even if there is a downturn globally....we will manage quite well because we are participating in local markets," Jenisch told journalists.

"I am expecting a further acceleration of our growth and earnings dynamics in 2019."

Sales rose 1.6 percent in 2018, falling short of forecasts, although the 5.1 percent increase when currency and divesitutres were removed was within the company's guidance.

His upbeat mood comes despite concerns about slowing economic growth, the U.S.-China trade war, and a potential no-deal Brexit dampening business confidence.

Eurozone manufacturing activity went into reverse for the first time in over five years in February, while the International Monetary Fund has cut its forecasts for world economic growth for 2019 and 2020.

Nonetheless, the construction sector is proving resilient. The IHS Markit PMI for Eurozone construction rose to 52.6 in February from 50.6 in January, reflecting upturns in commercial and infrastructure activity, and expansion in house building, driven by low interest rates and strong demand. Germany saw a particularly strong rise.

The need to overhaul the United States' crumbling roads, airports, and bridges as well as ongoing infrastructure development in emerging countries adds to the building industry's relative confidence.

Jenisch is not alone in his optimism.

France's Saint-Gobain still expects growth in Europe, Asia and the Americas this year, while Ireland's CRH is also positive, particularly about the United States.

HeidelbergCement last month said it expects worldwide demand for cement to increase, particularly in Indonesia, India, sub-Saharan Africa and North America.

Jenisch said he had no concerns about hitting sales targets this year.

"We don't see any slowdown, we have very good order books in all regions with maybe the small exception of Africa," he said.

Part of LafargeHolcim's growth will be fuelled by small bolt-on deals -- companies with sales in the range of 20 to 150 million Swiss francs -- predominantly in mature markets like North America and Europe.

LafargeHolcim bought four companies in 2018, and expects to buy up to 10 this year having already bought four since January.

Jenisch expected little impact from Brexit, adding the building industry could even benefit from any extra infrastructure spending by the British government to support the economy after it leaves the EU.

"I produce and I supply in the UK, so Brexit I don't think will have a big negative impact for us," he said.

LafargeHolcim also reported slightly better-than-expected full-year recurring operating profit. Its shares were unchanged.


(Reporting by John Revill; editing by Brenna Hughes Neghaiwi and Alexandra Hudson)