Lafarge North America reports

Lafarge North America reports
Published: 27 July 2005

Lafarge North America Inc the leading supplier of construction materials in the US and Canada, today reported second-quarter 2005 net income of US$142.9m. Operating income for the quarter was US$208.2m, up US$40m, or 24 per cent, compared with the year-ago quarter as continued strong volumes in most markets and higher prices in all product lines positively affected earnings. The strengthening of the Canadian dollar contributed US$6.4m to operating income during the quarter. However, diesel, gas and coal costs were US$13.3m higher in the quarter compared with the same period a year ago.
 
"As we had anticipated, we had exceptionally strong sales this quarter, in fact, demand for cement exceeded the record levels established last year," said Philippe Rollier, president and chief executive officer of Lafarge North America. "Prices during the quarter were also favourable, and our market outlook for the balance of the year is optimistic. Although we are facing cost pressures and stretching our production and distribution capabilities to meet higher demand, our results this quarter were excellent, and we will continue to do whatever is necessary to meet the needs of our customers." 
 
Consolidated net sales were up 19 per cent over last year to US$1.17bn. Excluding the favourable Canadian exchange rate effect, net sales were 15 per cent higher than last year. US net sales increased 19 per cent compared with last year, while Canadian sales increased 9 per cent in local currency.
     
The aggregates, concrete and asphalt segment reported operating income of US$84.5m in the quarter, 19 per cent higher compared with US$70.8m during the second quarter 2004. The strengthening of the Canadian dollar contributed US$2.8 million to operating income in the quarter. Net sales during the quarter were US$693.9 million, up 19 per cent compared with the second quarter of 2004, or 13 per cent higher excluding the favourable impact of the exchange rate. 
 
Aggregates (crushed stone, sand and gravel) shipments totaled 38.1Mt during the quarter, 6 percent above 2004 levels. The increase was driven primarily by strong demand in Western markets. Volumes in the US were up 7 per cent over the year-ago quarter, with strong market conditions in the Great Lakes area, Missouri and New Mexico, and improved market conditions in Colorado. Average aggregate selling prices during the quarter were up five per cent in the US and six per cent in Canada compared with the same period in 2004 as a result of the successful implementation of price increases in all markets.
 
Ready-mixed concrete volumes declined one per cent compared with the same period last year, to 3.2m cubic yards. In Canada, volumes decreased three per cent primarily as a result of unusually wet weather in western Canada, strikes in British Columbia, and reduced construction activity in Ontario. Shipments in the US increased two per cent on the strength of project activity in New Orleans. Average prices rose eight per cent compared with the year-ago quarter. However, operating income was negatively impacted by sharply increased fuel and raw material costs. 

The cement segment reported operating income of US$131.5m during the quarter, 17 per cent higher compared with the second quarter 2004. The improvement reflects increased sales volumes and higher pricing. Net sales during the quarter were US$440.5m, an increase of 17 per cent compared with last year. Excluding the favourable impact of the exchange rate, operating profits rose 13 per cent and revenues rose 15 per cent compared with the same period in 2004. 
 
Total cement sales volumes during the quarter were 4.2Mt, up three per cent compared with last year. US volumes increased three per cent to 3.1Mt, while Canadian volumes increased four per cent to 1.1Mt. Average cement prices were 10 per cent higher compared with the same period in 2004 due to the effect of two successful price increases in 2004, followed by an additional increase during the first half of 2005. Prices in the US were up 12 per cent over the same period last year, while prices in Canada were up six per cent. Additional price increases are taking effect this summer in several US markets. 

Outlook: The company is very encouraged by the continued favorable market conditions experienced during the first half of the year. Demand is expected to remain strong during the second half. Year-over-year comparisons, however, will be challenging due to the good weather conditions experienced in the latter part of 2004. The company expects to realize additional pricing gains in all product lines, as well as benefit from the accelerated maintenance and other preparatory actions the company took during the first part of the year. Some of these gains will be offset by continued increases in energy and transportation costs.