Lafarge lowers demand forecasts on lower 1Q11 results

Lafarge lowers demand forecasts on lower 1Q11 results
Published: 05 May 2011

Lafarge has lowered its forecast for demand in 2011 after it posted slightly lower-than-expected first-quarter results. While the company said it is well positioned for 2011 earnings growth it is now forecasting a rise of 2-5 per cent in demand. In February, it predicted a 3-6 per cent rise increase.

Lafarge said in a statement on Thursday current operating profit fell five per cent to EUR224m (US$312.9m) in the first quarter. Sales rose nine per cent to EUR3.56bn, driven by higher volumes in all product lines across both emerging and developed markets. EBITDA was stable at EUR514m. Net income group share and earnings per share improved when excluding the first quarter 2010 one time gain of EUR137m for the sale of the investment in Cimpor.

Cement sales increased 8%, reflecting solid volume improvements across most regions, new capacities in Brazil, and the benefit of foreign exchange. Volumes increased 7%, with growth seen in both developed and emerging markets. Pricing was slightly below first quarter 2010, but moved higher compared to fourth quarter 2010. Cost reduction program strongly benefited all regions.

Middle East Africa cement operations outside of Egypt showed positive performance as current operating income increased 6% when excluding the EUR30m decline experienced in Egypt from recent events.  Current operating income was down 10%, impacted by the higher inflationary environment and events in Egypt.

Commenting on the outlook for the remainder of the year, Lafarge said: “Overall the Group continues to see cement demand moving higher and estimates market growth of between 2- 5 per cent in 2011 versus 2010. Emerging markets continue to be the main driver of demand and Lafarge benefits from its well-balanced geographic spread of high quality assets. For developed markets, the Group expects that demand will continue to recover."

The Group said is on track to achieve more than EUR2bn of deleveraging and EUR200m of structural cost savings in 2011.

Lafarge expects overall pricing to move higher for the year in the context of a higher cost inflation environment, although levels of pricing movements will vary by market, the group added.