Holcim warns of AfriSam impairment

090508 Cement companies in South Africa are to increase their prices on cement.picture Simphiwe Mbokazi 8

090508 Cement companies in South Africa are to increase their prices on cement.picture Simphiwe Mbokazi 8

Published Jan 16, 2012

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The financial restructuring agreement relating to its South African business AfriSam has led to an impairment charge, cement maker Holcim says.

“As announced in 2007, Holcim initiated a transaction to create AfriSam (previously Holcim SA) as part of the South African policy to support Black Economic Empowerment (BEE).”

“Holcim sold its majority stake to a BEE-compliant consortium, and has since held a minority stake of 15% in AfriSam,” the group said in a statement.

It added that it had continued to support the company technically, and in 2009 subscribed to a notes issue in the amount of R2.6 billion or CHF292 million.

“As demand for construction materials has heavily decreased since 2010, AfriSam found itself forced to initiate additional financial restructuring measures in 2011. Holcim agreed to these measures yesterday after extensive negotiations.”

However, due to this restructuring decision, Holcim was writing off investments, made up of the notes issue, accrued interest and foreign currency movements, by CHF 415 million in the fourth quarter of 2011.

As a consequence of the decrease in demand for construction materials in some regions, Holcim said it was making value adjustments.

“Since the financial crisis in 2008, cement consumption in Spain has decreased by 65%, in parts of Eastern Europe by 30%, and in the US by 45%.

“As demand for construction materials will only slowly recover, and production capacity utilisation rates will remain unsatisfactory, property, plant and equipment, and goodwill impairment amounting to CHF360 million will be charged in the fourth quarter 2011.

“This figure comprises CHF328 million from group region Europe (Spain and certain markets in Eastern Europe), and CHF32 million from North America, related to the permanent closure of the Catskill and Artesia plants of Holcim US.”

The total of these cash-neutral impairments amounted to CHF775 million.

However, a payout potential for the 2011 financial year (pre-impairment) remained.

“The board of directors will decide on the level of the payout at the end of February 2012, as part of the year-end financial statement to be submitted to the annual general meeting,” the group said. - I-Net Bridge

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