By John Revill
ZURICH (Reuters) -Holcim will react to slowing construction markets by increasing its profit margin, the world's largest building materials maker said on Friday, after reporting third-quarter profit slightly above expectations.
The Swiss company, whose building products are used in housing, commercial buildings and infrastructure schemes, said it was seeing "challenging economic conditions" with weaker demand in some markets.
The company was experiencing a slowdown in Asia, where the Chinese property market has had difficulties, and in Europe, where economies are cooling.
Still, Holcim (SIX:HOLN) - although less upbeat than in recent months - said it could tackle the tougher conditions as it raised its full-year profitability guidance by one percentage point to above 17%. It confirmed the rest of its full-year guidance.
The company had delivered profitable growth in the third quarter "despite challenging economic conditions, marked by softer demand in some markets and foreign exchange headwinds," Chairman and CEO Jan Jenisch said.
He said Holcim was increasing profitability by selling better, higher value solutions for customers.
"We have entered the roofing segment successfully where we have high EBIT margins," Jenisch told reporters. "You can also expect that the sustainability products we have launched, EcoPact, EcoPlant, EcoCycle, that they have also good margins."
Holcim also invested a lot in North America where it enjoys better profitability, Jenisch said.
"Holcim is well-positioned to deal with a slowdown, because it has a high exposure to the more resilient infrastructure market, while cement prices remain well supported," said Bank Vontobel analyst Bernd Pomrehn.
In the quarter ended Sept. 30, Holcim increased its recurring operating profit 3.1% to 1.6 billion Swiss francs ($1.78 billion), slightly exceeding expectations for 1.56 billion francs.
With Holcim's results seen as a proxy for the broader construction sector, it has been buoyed by rising contribution from the solutions and products business which boasts higher margins for items such as solar power generating roofs.
Its sales were down 8.8% at 7.34 billion francs, in line with expectations as the company no longer had a contribution from the Brazil and India businesses sold last year.
But when the impact of mergers, acquisitions and currencies was removed, sales were 4.3% higher, due to higher prices and more expensive products being sold, as globally volumes declined.
It's shares were around 1% lower at 0930 GMT.
($1=0.8985 Swiss francs)