LafargeHolcim (HCMLY) shares slumped in early Zurich trading Wednesday as investors continued to fret over the fate of the world's biggest cement maker's Syria payments scandal even as it posted stronger-than-expected first quarter earnings.
The Swiss-based group posted adjusted EBITDA of Sfr840 million ($847 million), up 14.5% on a like-for-like basis on the same period in 2016, on sales of Sfr5.63 billion, up 5.3% on a like-for-like basis. Analysts had forecast EBITDA of about Sfr780 million. The gains marked a fourth-consecutive quarter of earnings growth thanks to improved pricing and strong demand in the US, Middle East and Africa.
Shares were under pressure in Zurich, however, as the company searches for a new CEO following the pending departure of Eric Olsen, who will step down in July following an investigation that found that the company made "unacceptable" payments to Syrian militia groups to protect its operations in that country during 2013 and 2014.
LafargeHolcim shares were marked 0.8% lower at Sfr56.95 each by noon in Zurich compared to a 0.35% gain for the SMI benchmark.
Oslen, who will leave on July 15, denied any involvement in making the payments but said that he would quit to draw a line under the scandal. He will be replaced on an interim basis by group chairman Beat Hess.
LafargeHolcim said the first quarter results underpinned a positive outlook for the rest of the year. It maintained its 2017 forecasts of double-digit growth in adjusted operating EBITDA and recurring earnings per share in excess of 20%.
"Continued pricing strength, improving volume momentum and synergies underpinned our results across the portfolio," said Olsen said. "Our Middle East Africa region performed particularly well with a recovering Nigeria making a notable contribution to earnings growth."
Demand for cement, by tonnage, remained unchanged in the first quarter, while prices were up 5.3%, driven by price increases in the Middle East, Africa and Latin America. Cost savings linked to the group's formative merger in 2015, contributed Sfr94 million to earnings, leaving the company on track to reap a target Sfr400 million of savings over the course of this year.
"In 2017, we will deliver sustainable, profitable growth through continued strong focus on lower Capex, structural cost savings, synergies and commercial differentiation of our products and building solutions," said the company. "This will be particularly supported by the contribution of several markets such as the US, India, Nigeria and some countries in Europe while we forecast demand in our markets to increase by between 2% to 4%."