Being the world’s largest cement maker means a huge carbon footprint. That makes Holcim unappealing to many investors. Hence the efforts by the Swiss company to pivot away from cement into the lighter, greener end of construction. The $6.4bn sale of its Indian businesses to coal-to-ports conglomerate Adani Group will provide plenty of firepower.
It is getting a good price for the Indian cement assets. The enterprise value is 12.5 times ebitda, more than double Holcim’s multiple of six times. The cash proceeds will bring its net debt-to-ebitda ratio down to 0.4 times by the year end. These will be used to fund acquisitions, with the aim of raising sales from environmentally efficient or innovative building products by a half to 30 per cent by 2025.
Deals will not come cheap, given strong competition. The $3.4bn paid for Nashville-based Firestone, which specialises in roofs that can be equipped with solar panels, thicker insulation and greenery, was 13 times ebitda. Holcim’s targets are unlikely to be as profitable as its cement businesses which earn 30 per cent ebitda margins. Accordingly, Berenberg has pencilled in 200 basis points of margin erosion by 2025.