Lafarge says inflation, currencies to impact profit growth

Lafarge says inflation, currencies to impact profit growth
Published: 01 August 2011

Lafarge current operating profit declined to €702m (US$1bn) from €838m a year earlier, the Paris-based company said in a statement today. Analysts surveyed by Bloomberg had estimated €741m. Sales were unchanged, and net income dropped 12%.


The company is “working to improve results” this year, CEO Bruno Lafont said on a conference call with journalists. “But we have to take into account an environment that’s more contrasted more complex and more volatile than forecast.”


Standard & Poor’s cut Lafarge’s credit rating to below investment grade in March, saying profitability will struggle to recover because of rising raw material prices and political turmoil in Egypt. Lafont has pledged to reduce debt by at least €2bn this year, with a 50% dividend reduction, asset sales and cost cuts.


Net debt was €14.3bn at the end of the second quarter, compared with €15.2bn a year earlier and €14bn at the end of 2010.

Lafarge said today it is on track to meet its debt-cutting goal for the full year. The company has already sold or agreed to sell €1.8bn of assets this year, the CEO said.


This month, Lafarge entered exclusive talks to sell most of its European and South American gypsum business to Etex Group for €850m, and its Australian gypsum unit to Knauf International GmbH for €120m.


In May, it agreed to sell US cement and concrete assets with an enterprise value of US$760m to Cementos Argos SA. Three months earlier, Anglo American Plc and Lafarge agreed to combine UK building-material operations with the aim to generate annual cost savings of at least GBP60m. All four transactions have yet to be completed.


Lafarge’s net income fell 12% in the second quarter to €289m from €329m a year earlier, when it booked a capital gain. The French company reiterated forecast that cement demand in its markets will grow by 2% to 5% in 2011.