European building materials: Citi expects price hikes to fully offset costs in H2

Vicat SA

01/09/2022 12:28

** In a note on European building products, Citi says it
expects price hikes to fully offset the impact of energy cost
inflation in H2, at the cost of some volume deterioration
    ** The brokerage sees a positive price-cost spread by Q4, if
not earlier, with sequential price hikes fully in effect on
EBITDA
    ** Citi favours diversified names such as CRH  CRH.L  and
Holcim  HOLN.S  (both "buy") with built-in resilience from
geography, while their exposure to light materials offers more
stable growth with renovation tailwinds
    ** It says HeidelbergCement  HEIG.DE  and Buzzi Unicem
 BZU.MI , with their exposure to Germany and Italy that rely
heavily Russian gas, face a higher cost inflation pressure, but
keeps "buy" recommendation
    ** It says HeidelbergCement and Buzzi will need higher price
increases than peers to mitigate the surging costs, resulting in
an estimated mid-single-digit volume decline
    ** Buzzi is further disadvantaged in the short-term by its
limited hedging position on energy costs, Citi says
    ** Citi adds the euro depreciation remains a tailwind for
Buzzi Unicem, HeidelbergCement and Vicat  VCTP.PA  ("buy") due
to their exposure to the U.S. market, while negatively impacting
CRH, which reports in USD, and Holcim, which reports in CHF

 (Reporting by Marta Frackowiak)
 ((marta.frackowiak@thomsonreuters.com))