FLSmidth CEO Bets On Emerging Markets To Drive Growth

FLSmidth & Co. (FLS.KO) expects cement production in India, South America and Africa to rise further and demand in Europe and North America to remain lackluster, the Danish equipment supplier to the cement and mining industries said Thursday.

"In North America and Europe ... we still see a very depressed economy with no need for new capacity in the short term," Chief Executive Jorgen Huno Rasmussen told analysts and reporters at a briefing after the company's third-quarter earnings release.

He added that stagnating demand in North America and Europe won't pose a problem for FLSmidth as the company mainly was focused on emerging markets.

"Our markets are developing markets," he said.

India currently is the world's second-largest market for cement after China. FLSmidth this year expects capacity in the Indian market to rise by between 25 million tons and 30 million tons of new cement kiln capacity, which represents about half of the world's estimated new cement kiln capacity in 2010.

FLSmidth's remarks echo comments made earlier this month by some of its peers.

French building materials company Lafarge SA (LG.FR) said it continued to see rising demand in emerging markets, offsetting stagnant demand elsewhere.

Swiss building materials supplier Holcim Ltd. (HOLN.VX) said it was looking increasingly at emerging markets for growth as it expects cement sales in developed countries to remain sluggish for at least three more years.

CA Chevreux Nordic analyst Johan Elisason said companies would build new cement plants only where they saw long-term growth opportunities.

"By replacing a few parts here and there a factory can run for up to a hundred years," he said, adding that cement tended to be a very local business.

"With few exceptions there are no profits to be made transporting cement more than 200 kilometers. That's why cement plants have to be built where the cement is actually used," he said.

The cement business represents 48% of FLSmidth's revenue and 55% of its earnings before interest and tax. The company also produces machinery for the mining industry. This year the company expects its cement business to yield revenue of between 9.5 Danish kroner and 10 billion Danish kroner ($1.74 billion and $1.83 billion).

-By Jens Hansegard, Dow Jones Newswires; [phone]; [e-mail]