By John Revill
ZURICH (Reuters) -Holcim’s CEO said on Monday more big acquisitions are possible in “the next few months” after the cement maker announced it was buying German walling systems maker Xella for 1.85 billion euros ($2.16 billion).
The acquisition will help Holcim tap the growing European refurbishment market, it said, worth around 250 billion euros a year according to EU estimates, with renovation rates set to double in coming years to boost older buildings’ energy efficiency.
Xella, which makes blocks used to improve heat and sound insulation under the brands Ytong, Silka, Hebel and Multipor, has projected sales of around 1 billion euros this year.
“We are working on other big deals, which could be coming in the next few months,” Holcim CEO Miljan Gutovic told Reuters.
GREATER FOCUS ON SUSTAINABILITY
Gutovic said the Xella acquisition, the Swiss company’s largest in four-and-a-half years, was part of its increased focus on sustainable construction.
“Around 80% of the buildings that we live in today will still exist in 2050, which means we need to constantly invest to repair, to refurbish, and keep them up to standard,” Gutovic said.
Driving growth are higher standards for energy efficiency and sound insulation, important as cities become more densely populated and try to reduce their carbon footprint.
Standards for energy efficiency and noise reduction “are already there in many of the big cities, and are becoming more stringent”, Gutovic said.
There is also increased construction of new homes, with Europe having an estimated shortfall of 10 million dwellings.
HIGHER GROWTH EXPECTED IN BUILDING PRODUCTS BUSINESS
The transaction also reflects Holcim’s tilt toward its building products business which offers higher growth and profitability than its traditional cement and aggregates business, driven by demand for roofing, insulation and prefabricated systems.
Holcim said it was paying a multiple of 8.9 times Xella’s projected 2026 earnings before interest, tax, depreciation and amortisation, and said it expected the acquisition to be earnings accretive in year one.
Cost savings could be achieved by Holcim increasing its supplies of raw materials like cement Xella uses to make its blocks, Gutovic said. There were no plans to cut jobs at the company, which has more than 4,000 employees, he added.
($1 = 0.8570 euros)
(Reporting by John Revill, editing by Kirsten Donovan and Jan Harvey)
