EU permits to boost profitability in cement though volumes fall - GS

CRH

14/04/2023 11:18

** The EU emissions trading system (ETS) carbon-capping
scheme will increase cement profitability even though volumes in
the sector will slide, says Goldman Sachs
    ** "ETS has redefined cement supply-demand dynamics in
Europe... and structurally lifted the industry's profitability
against our initial expectations," says the brokerage
    ** GS expects a "significant uplift" in EU cement
profitability in 2023 thanks to ongoing free CO2 permits and
abating inflationary pressures
    ** It says Italy and Germany most at risk of pricing
pressure, though they have passed material price hikes in recent
months
    ** "As opposed to Europe, we expect cement real
pricing/earnings to decline in most other regions in the next 2
years, following the traditional supply-demand dynamics," it
adds
    ** GS double upgrades Heidelberg Materials  HEIG.DE  to
"buy" from "sell", noting it has the largest EU exposure and
lower price-cost vs peers, and favourable earnings momentum
    ** The brokerage retains a "sell" rating for Holcim 
 HOLN.S , expecting a "clear volume deterioration" and a -9%
like-for-like EBIT result for FY 2024
    ** It also keeps CRH  CRH.L  at "sell", saying its CO2
deficit stands on the higher side of the industry range

 (Reporting by Anna Mackenzie)
 ((Anna.mackenzie@thomsonreuters.com))