We maintain a HOLD rating on Holcim Liban with a target price of USD 15.21 per share, presenting only a 1.93% downside over its recent closing price. When comparing HL to its regional peers, we find that with a P/E ratio of 15.3, the cement producer may be fairly valued compared to its peers which hold an average P/E of 16.4. However, Holcim’s shares are currently yielding a very attractive 7%-9% in dividends but the challenging regional and local political situation continue to negatively impact share price.
Lower local demand dragged Holcim Liban’s (HL) revenues down by 7.5% y-o-y in the first half of 2012 to reach $89.8 million. Gross income fell by 37.4% y-o-y in H1 2012 to attain $24.4 million due to the simultaneous increase in productions costs and a steep decline in revenues. Earnings followed suite, almost halved to $9.1 million from $19.9 million during the same period last year with profit margin plunging to 10.1% from 20.5%. On a positive note, HL’s investment in Waste Heat Recovery couldn’t come at a better time. Starting in 2013, HL will be able to reduce production costs by around $3 million annually, cutting fuel consumption and lowering HL’s profit variability in relation to oil prices.
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Holcim Results Review H1 2012