(Adds CEO comments on markets, debt in third, fifth and sixth paragraph.)
Nov. 4 (Bloomberg) -- Lafarge SA, the world’s biggest cement maker, reported third-quarter profit that beat analysts’ estimates as sales rose in emerging markets, and announced new cost-savings measures to widen debt reductions in 2012.
Operating income, excluding some items and the gypsum division that Lafarge is selling, fell 9 percent from a year earlier to 750 million euros ($1.04 billion), the Paris-based company said in a statement today. Analysts surveyed by Bloomberg had predicted profit of 721 million euros. Restated for the gypsum unit sale, revenue climbed 1 percent, while net income fell 10 percent to 336 million euros.
“We’re awaiting 2012 with caution as we’re not expecting a significant pickup of markets in developed markets,” Chief Executive Officer Bruno Lafont said today on a conference call with journalists. “We’re still expecting growth in emerging markets.”
Standard & Poor’s and Moody’s Investors Service have cut Lafarge’s credit rating to below investment grade this year, saying the company will have difficulty restoring profitability because of rising raw-material prices, political turmoil in the Middle East and a lingering construction slump in countries such as the U.S., Spain and Greece. Lafont today reiterated a pledge to reduce debt by at least 2 billion euros this year with a 50 percent dividend reduction, asset sales and cost cuts.
Lafarge said today it has already sold or agreed to sell more than 2 billion euros of assets this year, including more than half of its gypsum business to buyers including Etex Group, and some cement and ready-mix plants in the U.S. to Cementos Argos SA. The deal with Cementos was completed in October, and the closing of the transaction with Etex is “imminent,” Lafont said.
Lafont also announced a new 500 million-euro cost-reduction plan and said most of the benefits would come next year. The company plans to reduce debt further in 2012 and improve its financial structure “rapidly” by striving to raise prices in coming months, limiting 2012 capital expenditure to 1 billion euros and selling more assets next year, the CEO said.
Net debt was 14.3 billion euros at the end of the third quarter, compared with 14.7 billion euros a year earlier and 14 billion euros at the end of 2010.
Lafarge’s revenue of 4.21 billion euros was in line with an analyst estimate of 4.25 billion euros. Excluding currency fluctuations, asset sales and acquisitions, revenue rose 6 percent.
The French company reiterated a forecast that cement demand in its markets will grow by 2 percent to 5 percent in 2011.
HeidelbergCement AG, the world’s third-largest maker of cement, said on Nov. 3 that third-quarter sales rose 7 percent while operating income fell 2 percent as costs of energy and raw materials climbed. Holcim Ltd., the world no. 2, reports earnings Nov. 9.
--Editors: Tom Lavell, Thomas Mulier
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