Lafarge reported a first quarter 2010 decline in turnover by 9.7% to €3276m as unfavourable weather conditions, notably in Europe, North American and China, upset results. The fall was also attributed to still sluggish construction sectors in recession-hit developed countries. Cement shipments in the quarter fell by 7.4% to 29Mt, with turnover from cement declining by 8.5% to €2137m and the corresponding EBITDA fell by 15.4% to €485m.
"Very poor weather and the lower economic activity in developed countries and Eastern Europe negatively impacted volumes and margins," Lafarge said in a statement. EBITDA was down by 16.9% to €516m, with the running profit falling by 29.6% to €236m. Net interest costs were 21.2% lower at €178m and there was an exceptional credit of €137m on the sale of the Cimpor stake to Votorantim. Disposal of the investment interest in Cimpor in exchange for cement assets in Brazil, the fastest growing market in Latin America, is to be received in the third quarter 2010.
The group’s net debt at the end of March was 17.5% lower at €14,582m to give a gearing level of 81.4%, down from 118.7% a year earlier. Capital expenditure was reduced by 9.4% to €384m as maintenance capital spending was further cut from €165m two years ago to just €45m.
Capital expenditure for the full year should amount to around €1300m. Lafarge, which has been selling some non-core assets as it seeks to shore up its financial position, plans divestments this year of €300m to €500m. The group said costs savings are on target as it achieved structural savings of €50m during the quarter and divestments of €36m.
Confident a recovery will boost business in the second part of the year, the group maintains its previous estimate that cement volumes in its markets will increase up to five per cent in 2010 compared to 2009.
The company expects demand to start to recovering in developed countries during the second half of the year with emerging markets showing strength overall. Pricing is expected to remain solid for the year, despite lower prices in a certain number of markets. Overall energy costs are forecasted to be stable on a full year basis.