News

Swiss-based building materials company Holcim has announced plans to spin off its very profitable North American division on the New York Stock Exchange and is anticipating the sale will raise around $30 billion.

The bold move comes at the same time as the company has announced a new CEO, Miljan Gutovic, and marks a significant corporate transformation.

In Monday's early European trading, Holcim's shares rose by more than 5%.

Mr. Gutovic currently oversees Holcim's European operations and will take over from Jan Jenisch on May 1. The change at the top is just one element of the biggest restructuring the company has undergone since it purchased French competitor Lafarge in 2015.

The spin-off of the North American division is expected to take around a year to complete and be finalized by mid-next year.

Mr. Jenisch highlighted the North American division's strong performance, saying the division has been a powerhouse for the business, doubling in size in the last four years through organic growth and acquisitions, with an EBITDA margin exceeding 27%.

The spin-off strategy is designed to increase focus on the North American market and maximize supply chain efficiencies. Jenisch shared that Holcim plans a complete capital market separation, with a full listing on the New York Stock Exchange and no retained stake by Holcim.

Presently, the U.S. operations of Holcim aim to increase current annual sales from $11 billion to over $20 billion and return an operating profit of over $5 billion by 2030. The rest of Holcim's business, in Europe, Latin America, Africa, and Asia, will stay listed on the Swiss SMI index and concentrate on building products such as roofing products.

Jenisch, who has been heading Holcim since 2017, will continue as chairman and oversee the U.S. listing, where higher earnings multiples are typically seen for building materials companies, potentially further increasing Holcim North America's valuation.

This transaction has been in planning for quite a while as Holcim recognized that the North American business was not fully valued when compared to its peers, at only 7 times operating profit against a 10 to 15 times multiple of its counterparts.

As the U.S. is a prime construction market, the new entity is poised to capitalize on the region's infrastructure and construction boom. Holcim, as North America's top cement producer, employs 16,000 people across more than 800 sites in the region, competing with companies like Carlisle, RPM, Eagle Materials, and Summit Materials.

The North American business accounted for a quarter of Holcim's sales in the first nine months of 2023 and was the most profitable region, with sales growing more than 20% on average in recent years. Post-spin-off, Holcim will still see sales of around 17 billion Swiss francs ($19.7 billion) and employ close to 50,000 people.

Jenisch added that the U.S. operations were "simply too successful to be run as a subsidiary any longer."