Lafarge benefits from strong 2H

Lafarge benefits from strong 2H
Published: 23 February 2006

Lafarge said full year operating profit was Euro 2.357bn, up seven per cent on the year and up four per cent at constant prices. For the 2H period operating income was up 17 per cent. Net profit was Euro 1.096bn, up five per cent on the year.  Sales were recorded at Euro 15.969bn eur, up 11 per cent.  The company plans a six per cent dividend rise to Euro 2.55 per share, and an end to scrip dividends to avoid a dilution in EPS.
In a statement, CEO Bruno Lafont said Lafarge will restructure to raise its operating margin ’by one per cent’ by 2008 through raising efficiency and cutting costs. It did not give an overall group operating margin for 2005, and it was not clear if he meant one per cent or one percentage point in the statement.  He said the company expects eight per cent average annual EPS growth and an improvement in return on capital employed, with both being sustainable. 
A breakdown by main business area showed full year 2005 cement sales were up 12 per cent Euro 8.314bn. Operating profit in cement was up 11 per cent to Euro 1.770bn. Sales of aggregates and concrete rose 13 per cent to Euro 5.392bn, with operating profit up 12 per cent to Euro 398m.  Roofing sales were up one per cent to Euro 1.514bn, with operating profit down 34 per cent to Euro 98m.  Gypsum sales were up nine per cent to Euro 1.479bn, with operating profit up 14 per cent to Euro 151m. 
Lafarge said it expects strong cement demand in 2006, with prices rising by more than costs. Its outlook for other businesses in 2006 include modest growth in aggregates, favourable markets for concrete and improving markets for roofing in most of western Europe. It expects the gypsum business trend in western Europe to be favourable, but with a slowdown in price rises. 

As far as costs are concerned, after the record increases of the last two years, Lafarge expects energy and logistics costs to increase further in 2006. As in previous years, risk management policies and performance programmes should help mitigate the impact of these increases.