LafargeHolcim to offload Indian unit

Franco-Swiss cement group hails $1.4bn deal as ‘important step’ in divestment plan

epa05420151 FILE - A file photograph showing the logo of LafargeHolcim at the welcome desk of the head quarters in Zurich, Switzerland, 15 July 2015. The world’s biggest cement maker said on 11 July 2016 that LafargeHolcim has agreed to sell ist Lafarge India business to Nirma Ltd for an enterprise vaue of around 1.4 billion US dollars. EPA/PATRICK B. KRAEMER©EPA

LafargeHolcim, the Franco-Swiss cement group created by a €41bn merger last year, is to sell off some of its Indian operations in a deal worth $1.4bn.

The Zürich-headquartered company said it had “entered into a letter agreement” with Indian conglomerate Nirma for the divestment of Lafarge India, which includes three cement plants and two processing facilities.

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Eric Olsen, chief executive of LafargeHolcim, said the $1.4bn deal, which includes debt, was “an important step” in the divestment programme on which the company had embarked in an effort to streamline its business in the face of difficult market conditions.

“With this deal, two-thirds of the programme has been secured and the remainder of the programme is well on track. We are confident that we will meet our target by the end of this year,” said Mr Olsen.

“With the proposed buyer we have found the right partner who will be able to develop the business further in the interest of all our stakeholders.”

Shares in LafargeHolcim, which have fallen more than 40 per cent over the past year, were up 3.04 per cent on Monday afternoon, making the cement group the biggest climber in Switzerland’s blue-chip index.

Since the economic slowdown that followed the financial crisis, the cement industry has been suffering from a global supply glut, which has put pressure on prices. In response, Mr Olsen — who believes LafargeHolcim over-invested in the past — is shifting the group’s business model towards lower capital spending and stronger cash flow generation.

The cement group has promised shareholders SFr3.5bn of disposals in 2016, but said last month that a portfolio review had identified a further nine countries “where we will seek opportunities to divest if we can achieve favourable valuations”.

LafargeHolcim, which operates in about 90 countries, had already made other divestments this year, offloading assets in South Korea and Saudi Arabia, and merging operations in Morocco.

The group said on Monday that it would use the proceeds of the India deal — which is subject to approval by India’s competition commission — to pay down debt.

However, the transaction does not mean that the cement group is exiting the Asian country, which is now the world’s fastest-growing big economy.

LafargeHolcim still operates through two subsidiaries there, ACC and Ambuja Cements, whose combined annual capacity is more than 60m tonnes of cement. Lafarge India can produce 11m tonnes of cement each year.

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