Lafarge improves operational performance

Lafarge improves operational performance
25 February 2013

Full-year 2012 results published by global cement major Lafarge showed strong growth in emerging markets and improvements in operational performance, and it now expects to meet most of its cost-cutting goal one year ahead of target.
Lafarge's turnover increased 3.5 per cent last year to EUR15,816m and EBITDA by 7.2 per cent to EUR3450m. The trading profit showed a 12 per cent recovery to EUR2440m while pretax profit was also ahead by 36.2 per cent. However, net profit declined by 27.2 per cent to EUR432m but excluding exceptional items, increased by 70.4 per cent.

Capital expenditure last year was reduced yet again and came down by 31.9 per cent to EUR817m and will be limited to EUR800m this year. Current capital commitments include two major projects in Russia and India as well as increasing grinding capacities in Brazil, Philippines and Algeria.
Net debt at the end of December was 5.5 per cent lower at EUR11,317m, giving a gearing level of 63.8 per cent, or 72.2 per cent excluding minorities. Having secured close to EUR900m worth of divestments last year through the sale of non-core assets, Lafarge said it will shortly exceed its target of EUR1bn of disposals. The company also maintains its target of reducing net debt to below EUR10bn as "soon as possible" in 2013 and said it will meet most of its 2015 target to boost EBITDA by EUR1.75bn by the end of 2014.

European woes continue

Cement volumes fell by 2.9 per cent to 141.1Mt with the slowdown in European construction activity continuing to weigh on performance. Cement deliveries in the group region were 8.9 per cent lower at 29.6Mt. French cement volumes were down by five per cent while British shipments fell 8.3 per cent. Greece saw the fourth year of volumes dropping in excess of a quarter and were down 37.3 per cent YoY. Spain, meanwhile, has now been in double-digit decline for five years with the 2012 drop registering 26.5 per cent. Central and Eastern European cement volumes were off by some six per cent to 13.2Mt as the important Polish market went into decline with volumes down by 20.6 per cent in cement. Problems at one of the Russian plants led to shipments there declining by 4.2 per cent in spite of growing demand, but in Romania shipments rose seven per cent.

Strongest profit growth in Asia

Lafarge's strongest profit growth was in Asia where group turnover improved by 14.1 per cent to EUR2746m, of which cement contributed a 16.7 per cent advance. Cement shipments declined by 2.9 per cent to 44.3Mt but were ahead in Malaysia (+10 per cent) and by 6.7 per cent in both the Philippines and Indonesia. South Korea and India provided sales growth of just over 20 per cent, although volumes were only marginally ahead.

In North America turnover increased by 8.5 per cent to EUR3375m and EBITDA recovered by 26.7 per cent thanks to cost-cutting measures and a EUR24m one-off pensions gain. Cement shipments were off by 5.2 per cent in absolute terms to 12.8Mt, reflecting disposals, but underlying cement volumes improved by 1.7 and 7.8 per cent in the USA and Canada, respectively. Western Canada showed particularly strong volume increases both in cement and downstream activities thanks to energy sector investments.
Latin America turnover rose by 6.1 per cent and EBITDA by 20.3 per cent with cement deliveries 4.5 per cent higher at 9.2Mt. The Brazilian cement turnover increased by 9.9 per cent as volumes rose by seven per cent. For 2013, the group expects volume growth in Brazil to be in the region of 5-8 per cent. Ecuador and Honduras also saw a rise in turnover even though volumes eased by 1.1 and 0.9 per cent, respectively.
Middle East and Africa cement turnover rose by 4.1 per cent and EBITDA rose by 9.7 per cent with domestic deliveries 5.8 per cent lower at 45.2Mt. Egypt, traditionally Lafarge's biggest market in the area, saw volumes retreat by 11.7 per cent as new entrants tried to establish themselves in the market and the political situation discouraged many investments. The average price, however, did show some improvement. Morocco, which is another market where the number of competitors has been increasing and where demand has recently softened somewhat, saw cement deliveries drop by 8.2 per cent. Nigerian turnover rose by almost one-third as volumes increased by 23.3 per cent thanks to a full year's contribution from the new 2.2Mta works. Volumes also advanced in Algeria, Kenya and South Africa.

Market growth expected in 2013

Going forward, Lafarge predicted that stronger demand in emerging markets would help lift the cement market in 2013 as well as the recovery of housing in the United States. Overall, the group sees market growth of 1-4 per cent in 2013. Lafarge also noted that it expects higher pricing for the year and that cost inflation will continue albeit at a slightly lower rate than in 2012.

Published under Cement News