master in finance

Master Thesis
Department of Business Studies
MSc in Finance & International Business

Valuation of Holcim Ltd
A Building Materials Industry Based Company

Author: Christian Ryf Exam #: 402749 Advisor: Baran Siyahhan, Associate Professor, PhD Place, Date: Aarhus, July 2011

Abstract
What is the fair value of Holcim Ltd, a Swiss based building materials company? This is the central question of the following paper. Before the valuation will be performed, one has to understand the strategic and the financial background of Holcim Ltd to estimate input factors for the subsequently used Discounted Free Cash Flow (DCF) model. The strategic analysis reveals that the company is one of the big players within the Building Materials Industry and clearly follows a strategy of growth. In terms of the products, Holcim Ltd focuses its sales efforts on cement and aggregate products due to the high operating margins and the prevailing barriers of entry for competitors. The company largely increased their market presence in the Indian and Chinese market. Whereas the share of sales from the Asian Pacific market was at 9.4% in 2001, it grew to roughly 36% in 2010. However, the investments have mainly been financed by cheap debt capital which resulted in high debt to market ratios up to 54%. The associated leverage problematic has been experienced by Holcim Ltd in the wake of the financial crisis, showing interest coverage ratios which were reduced by more than half between 2007 and 2010. Holcim Ltd suffered from the hard hit of the financial crisis since construction activities were almost suspended. Sales and NOPLAT figures declined sharply due to which Holcim Ltd was urged to introduce a rigorous austerity program. This policy helped to maintain the necessary competitiveness in the industry and is seen as advantageous by the management for the expected economic upswing of the coming years.
On the basis of the strategic and financial

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