Holcim receives a bid to sell its cement business in India. This would mean that the Swiss group would forgo significant activities. But that fits in very well with the strategy.
Holcim is being reorganized.
The world’s largest cement company is continuing its strategy of having less and less to do with cement. There are increasing signs that Holcim will soon be shedding its activities in India. The emerging market is a growing market, but also a fragmented, competitive and therefore difficult one. The media has been speculating since mid-April that Holcim is working on the sale. Indian industrialist Sajjn Jindal has now confirmed a bid in the Financial Times. Jindal’s cement business would be worth $7 billion.
Even for a giant like Holcim, this isn’t about chunks. According to Vontobel, Holcim generated 13 percent of its sales in India last year, as well as 11 percent of its operating profit (Ebitda) and a tenth of its net profit. But the sale, which the company does not comment on, would be consistent: the company boss Jan Jenisch has been selling cement divisions of the old core business for a while. In September 2021, they said goodbye to Brazil for 1 billion dollars.
Jenisch uses the proceeds to buy more profitable suppliers of building materials – such as the roof shingle manufacturer Malarkey in the USA last December, which is a particularly attractive market. The Holcim “Solutions & Products” division, to which Malarkey now belongs, is to deliver 30 percent of group sales in three years. In 2020 it was only 8 percent. At the same time, traditional cement sales are to fall from 60 to around 30 percent. That ties up less capital and is more climate-friendly.
The strategy makes sense to analysts. At the same time, several domestic parties in India are interested in the cement, which should support the selling price. Holcim’s 63 percent stake in Ambuja Cements, which is at issue here, was worth around $5.9 billion as of Tuesday. It wouldn’t be surprising if Holcim outperforms India.
You can refer to Benjamin Triebe, Editor for Business and Business Twitter follow.