February 20, 2018 / 6:26 AM / 3 months ago

UPDATE 2-M&A synergies, economic growth lift HeidelbergCement

* Now expects synergies of 550 mln euros by end-2018

* Sees cost savings in Egypt

* Q4 RCOBD 892 mln eur vs Rtrs poll avg 855 mln

* Shares up 1.5 pct (Adds details on synergies, Egypt, shares)

By Christoph Steitz

FRANKFURT, Feb 20 (Reuters) - Germany’s HeidelbergCement on Tuesday raised its target for synergies from the takeover of Italcementi for the third time in less than a year and joined peers in forecasting a rise in construction activity along with economic growth.

The $4 billion takeover of Italcementi, announced in 2015, was part of HeidelbergCement’s push to expand in growth markets and keep up with larger Swiss rival LafargeHolcim, itself the product of a merger.

HeidelbergCement, which expects economic growth in North America, Europe and Asia to fuel building material sales this year, now expects cost savings from the acquisition to reach 550 million euros ($681 million) by the end of 2018.

This compared with a previous target of 470 million euros, which the group had already exceeded at the end of 2017, lifting its shares 1.5 percent as one of the biggest gainers among German blue chips.

Italcementi gave HeidelbergCement a bigger presence in several markets, including Egypt, where it saw significant savings “due to the realisation of synergies and the adjustment of the fuel-mix due to the commissioning of a new coal mill”.

HeidelbergCement did not provide an updated number on job reduction as a result of the acquisition, saying more details would likely be published at its annual news conference on March 22.

Based on preliminary figures, its fourth-quarter result from current operations before depreciation and amortisation (RCOBD) rose 16.5 percent to 892 million euros, helped by higher cement and clinker sales, beating the 855 million forecast by analysts.

A rise in global construction activity also led Covestro , a maker of materials for insulation foams and transparent plastics, to post higher-than-expected fourth-quarter core profit.

“The consistent focus on efficiency and margin improvement and the successful integration of Italcementi that led to higher-than-expected synergies contributed to this success,” HeidelbergCement CEO Bernd Scheifele said in a statement.

Since the acquisition was announced, shares in HeidelbergCement have gained a fifth, outperforming a 14-percent rise in the STOXX Europe 600 Construction & Materials index . LafargeHolcim’s shares are down 17 percent.

HeidelbergCement said demand for building products in Indonesia, its largest market, rose last year due to the start of infrastructure projects but was accompanied by pricing pressure.

It said construction activity fell in Britain as a result of uncertainty related to its decision to exit the European Union, a trend the group expects to continue this year.

$1 = 0.8076 euros Editing by Maria Sheahan and Jason Neely

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