Outlook: Lafarge FY profits to easily meet targets, France

Outlook: Lafarge FY profits to easily meet targets, France
21 February 2005


Lafarge SA, the world’s largest cement producer, will report full year net profit of EUR827-880m on Thursday morning, up from EUR728m the previous year, as the improved economic climate allowed the group to benefit from both volume growth and higher selling prices, analysts said.  

Operating profits should reach EUR2.165-2.19bn compared with EUR1.93bn, a 12-13.2 per cent rise that will easily meet Lafarge’s own target of over 10 per cent operating profit growth.  

Roofing activities are expected to be the only weak spot among Lafarge’s business lines, analysts said, resulting primarily from the weakness of the German housing market in the latter half of last year.  

Elsewhere, the core Cement division should post 10 per cent operating profit growth to EUR1.6bn, said analysts at Exane BNP Paribas, who expect group EBITA to rise 12 per cent to EUR2.17bn.

Profit growth at Blue Circle, acquired in 2001, is again expected to underperform the group as a whole, with analysts forecasting EBITA growth of just 2-4 pct for these activities.  

As few surprises are anticipated with earnings, investors are looking for any comments about acquisition strategy that may be made during an analyst presentation later Thursday morning.  

In October, Lafarge’s chief financial officer Jean-Jacques Gauthier reiterated the goal of buying only small- to medium-sized rivals in 2005, but the cement industry has seen a flurry of merger and acquisition activity since then.  

Exane BNP Paribas, for its part, noted that Lafarge has been rumoured as a potential bidder for Hanson PLC of the UK.  

But analysts at Deutsche Bank, in a recent research note, said Lafarge may reconsider its position in light of recent deals such as Holcim’s bid for Aggregate Industries PLC.  

’We still doubt Lafarge will stand by while its main rivals complete large deals and improve their strategic position at the expense of Lafarge,’ the brokerage said.  

Published under Cement News