Chemicals group Sika produces additives that prevent cement from cracking. LafargeHolcim hopes it will have the same effect on a brittle share price after poaching the company’s chief executive, Jan Jenisch, on Monday. Mr Jenisch, who begins in October, will need a robust exterior to withstand the challenges ahead.
First, the good points. Current LafargeHolcim boss Eric Olsen announced his resignation in April. The search for a replacement has taken barely two months. Mr Jenisch is respected for increasing Sika’s earnings per share by 19 per cent a year since his appointment in 2012. LafargeHolcim shares have dropped 19 per cent since the merger that created the group in 2015; Sika’s have jumped 81 per cent. Lastly, those who hope for a boss who can unite a fractious board and fight for minorities will be encouraged by Mr Jenisch’s form in squaring up to Sika’s own dominant shareholder.
His first challenge will be to restore credibility. The market has doubts about Lafarge’s strategy of raising prices to achieve a double-digit target for growth in earnings before interest, tax, depreciation and amortisation. Analysts’ consensus is SFr400m below the group’s SFr7bn target for 2018.
True, first-quarter results signalled some welcome tailwinds: a bounceback in Nigeria and margin improvements in the Middle East and Africa, a region that produces 30 per cent of adjusted operating profits. Net debt fell SFr3bn to under 3 times ebitda for the first time since the merger — although this was done by selling assets and thus sacrificing future income.
However, big markets such as Indonesia are slowing. Merger cost savings — SFr900m of a planned SFr1bn — are almost all in the bag. And the investigation into a Syrian business that prompted Mr Olsen’s departure continues. Shareholder relief at the smoothness of the succession will soon evaporate. Mr Jenisch will need to manufacture a more durable sales fillip to set any improvement in stone.
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