Lafarge builds outlook on emerging economies, asset sales
Cement and buildings materials multinational Lafarge, a barometer of the construction industry worldwide, reported a profit slip for the third quarter on Friday and said it would pursue asset sales next year to reduce debt.
The global group reported that net profit fell by 8.0 percent to 372 million euros (528 million dollars).
Current operating profit fell by 2.0 percent from the equivalent figure last year to 839 million euros, falling short of the figure expected by analysts polled by Dow Jones Newsires who had expected 858 million euros.
Analysts said that the overall figures pointed to an underlying fall in operating profit of 10.0 percent.
Lafarge stood by its forecasts for growth of its overall markets and said that it expected demand for cement on its markets to range between a fall of 1.0 percent and a rise of 3.0 percent this year from demand last year.
Chief executive Bruno Lafont said that the group saw signs of recovery in the market for building materials in the United States and in Canada and "we are going to experience strong growth in emerging countries."
However, he expressed caution about the short-term outlook in developed countries. Although the situation was improving in France and Britain, the crisis was continuing to affect some countries, including Greece and Spain.
The price of shares in the group fell by 1.96 percent to 44.35 euros in midday trading in a market here showing an overall fall of 0.10 percent, with analysts saying that they were disappointed with the third-quarter operating profit.
So far this year, the shares have fallen by slightly more than 23.0 percent.
Sales in the third quarter rose by 6.0 percent to 4.5 billion euros but when calculated on steady exchange rates and on the basis of a comparable asset base, sales fell by 2.0 percent.
For the first nine months of the year, sales were steady at 12.21 billion euros, but they fell by 4.0 percent on steady exchange rates and a comparable asset base.
For the first nine months, net profit was 765 million euros from 774 million euros last year, marking a fall of 1.0 percent.
Lafarge said that so far this year it had made cost savings of 300 million euros, of which 170 million euros were in the form of structural savings.
Seventy percent of the group's capacity to make cement is in emerging countries in which further investment is not planned until 2014 or 2015.
Lafont said in a telephone conference: "I consider that borrowings are too high. We are going to continue our divestment plans in 2011."
The value of these asset sales could exceed the target of slightly more than 500 million euros foreseen for this year.
At the end of September, net debt totalled 14.7 billion euros from 14.6 billion euros at the same time last year.
The noted that it had access to lines of credit totalling 3.8 billion euros with an average life of three years, and also had 2.4 billion euros of other available finance.
So far this year, asset disposals have raised 286 million euros, and an overall total of 350 million euros was assured. Lafont said that this meant that the target of 500 million euros this year would be achieved.
© 2010 AFP