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LafargeHolcim's new CEO writes off over $4 billion and sets out strategy

CEO Jan Jenisch of world's biggest cement group LafargeHolcim addresses the annual news conference in Zurich, Switzerland March 2, 2018. REUTERS/Arnd Wiegmann

By John Revill

ZURICH (Reuters) - LafargeHolcim's new chief executive set out his plan on Friday to revive the company's fortunes by cutting costs, selling assets and focusing on fewer markets as the world's biggest cement maker announced a $4 billion write off.

CEO Jan Jenisch took over in September to get the company back on track after a difficult marriage between France's Lafarge and Switzerland's Holcim in 2015.

The stock fell more than 7 percent after the strategy was revealed. Analysts said the new goals lacked ambition.

LafargeHolcim also reported a 3.1 billion Swiss franc ($3.3 billion) net loss during its fourth quarter, hit by the impairment charge as Jenisch cleared the decks for his overhaul.

Previous CEO Eric Olsen left after the company admitted paying armed groups in Syria to keep a plant running.

Jenisch now has a five-year plan targeting annual sales growth of 3 to 5 percent, recurring EBITDA growth of at least 5 percent, improvement in free cash flow to over 40 percent of EBITDA, and boosting the return on invested capital to more than 8 percent.

"The merger is now behind was quite an exercise and not an easy one. Building materials is a market that is growing above GDP globally, so would we would expect building materials to grow 2 to 3 percent," he told reporters.

"With our strong market positions we have to grow above the market," he said.

The revamp would include a focus on fewer markets to concentrate on the United States, Latin America, India and Africa.

"While the strategy looks sensible and more realistic than previous targets, it probably implies a reduction in consensus expectations," UBS analysts said in a research note.

A Zurich trader said the writedown had been badly received by investors.

In contrast to LafargeHolcim's full-year operating loss of 478 million francs, French building material company Saint-Gobain's annual operating profit rose 7.5 percent. German rival HeidelbergCement, which reported annual core operating profit up 14.2 percent, is due to give its 2018 targets on March 22.

President Donald Trump's decision to impose hefty charges on imported steel and aluminum would not hurt LafargeHolcim's business in the United States because the company makes all its products for its largest market, in the country, Jenisch said.

"I am very bullish on the U.S., this is the best single building materials market in the world," he said.


As part of its more focused approach, LafargeHolcim would sell assets worth around 2 billion francs and could also leave two or three countries.

Two thirds of the impairments were concentrated in Algeria, Malaysia, Iraq, Brazil, Indonesia and Egypt. The company said they followed an assessment of the value of a wide range of markets and of specific business units.

The company launched a cost savings drive of 400 million francs from its administration costs, saying it would close corporate office in Singapore and Miami.

It stopped its share buyback programme and kept its dividend steady while saying it would look at bolt-on acquisitions.

Jenisch said he hoped to do "a lot of deals". Last week LafargeHolcim made its first purchase under his leadership when it bought Kendall Group, an aggregates and ready mix concrete maker in Britain.

The fourth-quarter charge pushed LafargeHolcim into a net loss of 3.12 billion Swiss francs in 2017. Without the charge, net profit fell 31 percent to 270 million francs.

Revenue rose 2.7 percent to 6.7 billion francs.

($1 = 0.9348 Swiss francs)

(Additonal reporting by Rupert Pretterklieber; Editing by Keith Weir and Elaine Hardcastle)