Bloomberg News

Lafarge Will Reach 2015 Cost Reduction Goal One Year Earlier

February 20, 2013

Lafarge CEO Bruno Lafont

Bruno Lafont, chief executive officer of Lafarge SA. Photographer: Balint Porneczi/Bloomberg

Lafarge SA, the world’s biggest cement maker, said it’ll meet most of a cost-cutting goal one year early after fourth-quarter earnings beat analysts’ estimates on rising sales in Asia and Latin America.

Earnings before interest, taxes, depreciation and amortization rose to 856 million euros ($1.1 billion) from 798 million euros a year earlier, the Paris-based company said in a statement. Analysts surveyed by Bloomberg had expected 821.6 million euros. The stock surged as much as 4.4 percent today.

Chief Executive Officer Bruno Lafont is cutting costs and increasing sales from higher-margin services and markets such as the U.S. and China amid a construction slump in southern Europe, political turmoil in the Middle East, and rising energy prices. He also agreed to sell about 900 million euros of assets in 2012 as he’s trying to repair a credit rating that has fallen one level below investment grade.

“North America and all the emerging markets posted strong double-digit earnings growth,” J&E Davy’s analysts said in a note today. Lafarge reported a “strong set of numbers.”

Lafarge said today it will meet most of its 2015 target to boost Ebitda by 1.75 billion euros one year early.

Lafarge’s figures mirror the results of Germany’s HeidelbergCement AG, the world’s third-largest maker of cement, which on Feb. 7 also reported fourth-quarter profit that beat analysts’ estimates on growth in North America and cost cuts to offset a slump in Europe.

Asia Boost

HeidelbergCement, which dates back to 1873, has been pursuing 600 million euros in cost savings by the end of 2013. In the U.S., the Heidelberg, Germany-based cement maker benefited from an increase in residential construction, and higher prices in Indonesia boosted the Asian unit’s profitability.

Lafarge gained as much as 2.03 euros to 48.75 euros in Paris trading and was up 4.2 percent as of 9:04 a.m., valuing the company at 14 billion euros. Lafarge rose 78 percent in 2012, while HeidelbergCement added 40 percent, Holcim gained 33 percent and Italcementi dropped 7 percent.

Lafarge said today it will “shortly” exceed a goal it had set for 2012 to sell 1 billion euros of assets.

“Our first target is to ensure growth of sales, earnings and cash flow by accelerating the implementation of our strategic plan,” Lafont said on a conference call with journalists today. The company will also continue to make “tageted divestments” and resume “targeted investments to accompany market growth” this year.

European Woes

Lafarge’s debt shrank about 5 percent at the end of fourth quarter from a year earlier to 11.3 billion euros. Lafont has set a goal to trim the company’s debt below 10 billion euros “as soon as possible” this year.

The French cement maker had net income of 100 million euros in the fourth quarter as sales were little changed. Lafarge will propose a dividend of 1 euro per share this year, after paying 50 cents per share in 2012. Lafarge was expected to maintain the dividend at last year’s level, according to a Bloomberg forecast.

Cement demand in Lafarge’s markets will probably grow by 1 percent to 4 percent this year, the company said today. Lafarge said it plans to deliver 650 million euros of additional Ebitda from cost-cutting and innovation in 2013.

In France, cement demand will fall by about 9 percent this year after dropping 6.7 percent to 20 million tons in 2012, when imports rose 5.2 percent to 2 million tons, the French federation of cement makers said Feb. 11. The combined production capacity in France of its members Lafarge, Holcim, Vicat, Kerneos and Italcementi Spa’s Calcia, amounts to 27.5 million tons, according to the federation.

To contact the reporter on this story: Francois de Beaupuy in Paris at fdebeaupuy@bloomberg.net

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net


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