Holcim NZ turns to full-year loss as changed business model drives up distribution costs

Holcim New Zealand, the local unit of the world's biggest cement maker, posted a full-year loss after it changed its business away from manufacturing and into importing and distribution, incurring higher distribution costs.

The local holding company, Fernhoff, reported a loss of $12.3 million for calendar 2016 from a profit of $80 million in the previous year when it recorded other income of $92 million, largely reflecting a gain from the sale of its lime interests to Canada's Graymont. Sales fell to $140 million in 2016 from $174 million a year earlier.

As well as selling its lime interests, Holcim NZ shuttered its Westport cement plant, while investing in new import facilities. The 2016 annual report shows distribution expenses rose to $75 million from about $62 million in 2015, while most other expenses were relatively stable. It has cement import terminals in Auckland and Timaru and depots in Dunedin, Lyttelton, Nelson, Wellington and Napier, and operates three aggregates quarries in the North Island.

"We had higher distribution costs due to the transition of our business away from manufacturing," a company spokeswoman said. "Our results for 2016 and YTD 2017 are in line with expectations given our focus last year was on building the infrastructure to support our new business model and this year is about bedding down the changes."

The 2016 accounts include a $10.9 million provision for the closure of the Westport plant, down from a provision of about $21 million a year earlier.

Holcim is part of LafargeHolcim Group, the world's biggest supplier of cement, aggregates and construction-related services. Last month the parent company posted a 7.1 percent decline in first-quarter global sales to 5.6 billion Swiss francs while operating earnings fell 4.7 percent to 801 million francs.

Chief executive Eric Olsen said the company would "deliver sustainable, profitable growth through continued strong focus on lower capex, structural cost savings, synergies and commercial differentiation of our products and building solutions". He forecast "double-digit like-for-like growth" in operating earnings. LafargeHolcim Group is returning up to 1 billion francs to shareholders via a share buyback programme in 2017-18.

(BusinessDesk)