Executive Summary
Holcim is a Swiss-headquartered global building materials company that recently underwent a significant transformation with the 2025 spin-off of its North American business (Amrize). This spin-off removed the company's most profitable segment (~40% of sales, ~50% of EBIT), fundamentally changing the investment thesis.
Verdict: WAIT - Post-spin uncertainty requires monitoring
| Metric | Value | Assessment |
|---|---|---|
| Quality Grade | B+ | ROE 15.47%, but weaker post-spin |
| Moat | Moderate | NIMBY in aggregates, scale in cement |
| Valuation | Fair | P/E 13.6, EV/EBITDA 7.09 |
| Entry Price | CHF 55-60 | Wait for 25-30% pullback |
1. Business Overview
What They Do
Holcim is one of the world's largest building materials companies, operating in:
- Cement: Production and distribution of cement products
- Aggregates: Crusite stone, sand, gravel extraction
- Ready-mix Concrete: Pre-mixed concrete delivery
- Solutions & Products: ECOPact (low-carbon concrete), ECOPlanet (low-carbon cement)
Geographic Footprint (Post-Spin)
After spinning off North America (Amrize), Holcim now operates primarily in:
- Europe: Key markets include Switzerland, Germany, France, UK
- Latin America: Brazil, Mexico, Argentina
- Asia Pacific: India sold in 2022; focus on smaller Asian markets
- Middle East & Africa: Egypt, Morocco
The Amrize Spin-off Impact
| Metric | Pre-Spin Holcim | Post-Spin Holcim | Amrize |
|---|---|---|---|
| Sales Contribution | 100% | ~60% | ~40% |
| EBIT Contribution | 100% | ~50% | ~50% |
| Margin Profile | 19.1% EBIT | Lower | Higher (20%+ roofing) |
| Growth Outlook | Solid | Moderate | Strong (US infrastructure) |
Key Concern: The North American business was Holcim's crown jewel - #1 cement position, 71 years of limestone reserves, strong roofing exposure via acquisitions (Malarkey, Firestone). The remaining Holcim has less attractive growth prospects.
2. Moat Analysis
Aggregates Moat: NIMBY (Moderate-Strong)
- 46 years of reserves (11 billion tons)
- New quarry permits nearly impossible to obtain
- Local monopoly characteristics (transportation costs limit competition radius)
- #1 or #2 position in 85% of markets served
Cement Moat: Scale/Distribution (Moderate)
- High fixed costs create barriers
- Distribution networks (e.g., Mississippi River) hard to replicate
- BUT: Cement is ultimately a commodity
- Competition from CRH, HeidelbergCement, Cemex
Sustainability Differentiation
- ECOPact/ECOPlanet = 36% of sales (up from 30%)
- First-mover in low-carbon materials
- Potential pricing premium as regulations tighten
Moat Assessment: MODERATE
The NIMBY moat in aggregates is real but geographically fragmented. Cement is more competitive. Post-spin, Holcim lost its best moated assets (US aggregates with 71 years reserves).
3. Financial Analysis
Profitability (Buffett Test)
| Metric | Value | Test |
|---|---|---|
| ROE | 15.47% | PASS (barely) |
| ROIC | 8.34% | CONCERN (below 10%) |
| EBIT Margin | 19.1% | Strong (record) |
| Gross Margin | 44% | Healthy |
Note: These are 2024 figures (pre-spin). Post-spin profitability may differ.
Capital Allocation
- Dividend: CHF 3.10/share (4% yield), +9% 5-year CAGR
- Buybacks: CHF 1B completed in 2024
- Total Returns: CHF 8B returned to shareholders since 2018
- Payout Ratio: 11% (very sustainable)
Balance Sheet
- Debt/Equity: 0.64 (moderate leverage)
- Current Ratio: 1.49 (healthy)
- FCF: CHF 3.38B (strong)
4. Valuation
Current Metrics
| Metric | Value | Historical Range |
|---|---|---|
| P/E | 13.60 | Looks cheap |
| Forward P/E | 21.85 | More expensive |
| EV/EBITDA | 7.09 | Attractive |
| P/B | 2.73 | Fair |
| Dividend Yield | 4.0% | Good |
Fair Value Estimate
Using a blended approach:
- Earnings Power: Post-spin EBIT likely ~CHF 2.5-3B (vs CHF 5B pre-spin)
- P/E of 13-14x on normalized earnings suggests fair value
- BUT: Uncertainty around post-spin earnings quality
Conservative Fair Value: CHF 65-70 Current Price: CHF 77.56 Premium to Fair Value: +10-20%
Entry Prices
| Level | Price | Reasoning |
|---|---|---|
| Strong Buy | CHF 55 | 20% margin of safety |
| Accumulate | CHF 62 | Fair value with yield |
| Hold | CHF 77.56 | Current level |
5. Risk Factors
High Risk
- Post-Spin Uncertainty: Remaining business less proven standalone
- Construction Cyclicality: Sensitive to European/LatAm economies
- Decarbonization Capex: Significant investment needed for carbon reduction
Medium Risk
- Competition: CRH, HeidelbergCement gaining share
- Currency: Earnings in EUR, BRL exposed to CHF strength
- China Slowdown: Indirect exposure via commodity demand
Low Risk
- Dividend Safety: 11% payout ratio very sustainable
- Balance Sheet: Moderate leverage, manageable
6. Conclusion
What's Good
- ROE passes 15% Buffett test (barely)
- NIMBY moat in aggregates is real
- 4% dividend yield with 9% growth
- Attractive P/E of 13.6x
- Strong shareholder returns track record
What's Concerning
- Spin-off removed best assets (NA = 50% of EBIT)
- ROIC of 8.3% below cost of capital
- Post-spin company is "second tier" of original Holcim
- Less attractive growth profile (Europe/LatAm vs US)
Investment Thesis
Holcim is a quality building materials company trading at a fair price - but not an exceptional opportunity. The Amrize spin-off removed the highest-quality assets, leaving investors with a less attractive geographic mix.
For a value investor, the question is: Is remaining Holcim worth CHF 42B?
- Pre-spin: CHF 5B EBIT x 10x = CHF 50B (sensible)
- Post-spin: ~CHF 2.5B EBIT x 10x = CHF 25B (implied)
- Current: CHF 42B market cap suggests market expects better
Verdict: WAIT
The stock is not overvalued, but I'd prefer a 20-25% pullback to CHF 55-62 before establishing a position. The post-spin company needs 2-3 quarters to prove its standalone quality. Monitor for:
- Post-spin EBIT margin sustainability
- Organic growth in remaining markets
- Any strategic M&A announcements
Sources
- Holcim Investor Publications
- Stock Analysis - HOLN Statistics
- Holcim Full Year 2024 Results
- Holcim Competitive Analysis
- EODHD MCP (historical prices)