Holcim: YoY Energy Price Declines Helping EBIT

Core Insights - Holcim AG has shown resilience in revenue developments, benefiting from falling electricity and freight costs, although concerns about cement supply over the next five years persist [1][6][8] - The company reported a 12.7% increase in recurring EBIT in local currency for H1 2024, driven by lower costs [5][6] - The overall market dynamics indicate a potential threat from increased cement production capacity in India and import dynamics from China, which could impact Holcim's market position [4][8] Financial Performance - The fully diluted earnings per share for Holcim AG were reported at 2.16 in H1 2024, reflecting a 1.6% growth in local currency [2] - EBIT performance for H1 2024 was recorded at 2,210 million CHF, up 8.1% compared to the previous year [5][6] - The cost of goods sold (COGS) has decreased significantly, contributing to the solid EBIT performance, with electricity and fuel costs accounting for 30-40% of COGS and freight around 20-30% [6][7] Market Dynamics - The company is focusing on value and cost efficiency amidst soft volume trends in most markets, except for Asia and the Middle East [4] - Significant capacity increases in India are expected to boost global cement production by 25% over the next six years, posing a competitive threat to Holcim [4][8] - The cyclicality and commodified nature of the cement business raise concerns about the durability of the current decrease in energy prices and potential supply chain disruptions [8] Competitive Landscape - Holcim's forward P/E ratio is around 13x, which is higher compared to competitors like Heidelberg Materials AG at above 8x, raising questions about its value proposition in the market [8] - The focus on reducing emissions and costs among producers in major markets like Europe and North America may limit growth opportunities for Holcim [8]