Aug. 2 (Bloomberg) -- Lafarge SA, the world's biggest cement maker, increased second-quarter profit 17 percent by raising prices and adding plants in China, Poland and Russia.

Net income jumped to 572 million euros ($781 million), or 3.31 cents a share, from 490 million euros, or 2.81 cents, a year earlier, the Paris-based company said in a statement today. Revenue advanced 2 percent to 4.69 billion euros.

Lafarge, which gets half its sales in emerging markets, added capacity as it competes with Holcim Ltd. and Cemex SA to tap a building boom in Asia, Latin America and eastern Europe. Strong cement demand should help keep prices high for the rest of the year, the company said. North America sales fell in the quarter, crimped by the U.S. housing slump.

``Growth in emerging markets is the key driver,'' said Imran Akram, an analyst at Deutsche Bank in London. ``The outlook is positive for the rest of the year, boosted also by substantial cost savings. We will potentially upgrade our estimates and remain strong buyers.''

Shares of Lafarge rose as much as 3.5 euros, or 2.8 percent, to 126.7 euros and were trading at 124.15 euros as of 12:18 p.m. in Paris. The stock has advanced 11 percent this year, outstripping a 3 percent gain in France's benchmark CAC 40 Index and giving a market value of 21.8 billion euros.

Shares of Switzerland-based Holcim, the world's second- biggest cement maker, have added 15 percent this year and those of No. 3 Cemex of Mexico, which is more exposed to the U.S. housing decline, are down 5.7 percent.

`Structural Improvement'

``The increase in our earnings reflects the structural improvement in our operations and the cost reductions implemented throughout the group,'' Chief Executive Officer Bruno Lafont said in the statement. ``Our margins are up sharply. We are confident for the second half of the year.''

Volumes in China were ``very positive,'' the company said, growing 18 percent in the first half on a comparable basis. Lafarge has been present in China since 1994 and two years ago became the largest producer in Sichuan and surrounding provinces, a region with a cement market roughly equal to that of the whole of North America.

Roofing Disposal

First-half net income rose 70 percent to 934 million, Lafarge said, beating the 876 million euros predicted by analysts, as revenue gained 4 percent to 8.39 billion euros. Earnings were boosted by the 1.96 billion-euro sale of its roof- tile unit to private-equity firm PAI Partners, which was completed in March, and by the disposal of Turkish unit Ybitas.

Lafarge is counting on growth in emerging markets to compensate for declines in North America. The gypsum business will be ``strongly impacted by the residential market slowdown'' there, the company said today.

Lafarge aims to get more than two-thirds of its revenue from emerging markets in the future as it buys companies and builds new plants in China and India, Lafont said on July 7.

Some 10 percent of revenue already comes from Asia, compared with only 1 percent a decade ago. The French company opened a new cement line in Dujiangyan, Sichuan province, in January and now has about Chinese 25 plants and grinding stations. Capacity in the country totals 23 million tons.

Lafarge has two plants in Poland, where it plans to boost output by 25 percent over the next 18 months, and two in Russia.

Cost-Reduction Plan

Lafarge is on target to cut costs by 340 million euros by the end of next year, the CEO said on June 28. The target was set out in the Excellence 2008 performance plan, announced last year. The company is focusing primarily on existing plants as it seeks to boost annual cement capacity by 40 million tons.

Lafarge bought out minority investors in its North American unit in May last year for $3 billion, adding to per-share earnings and speeding decision-making amid the U.S. decline.

First-half current operating income rose 20 percent to 1.36 billion euros, Lafarge said in today's statement. Net debt fell 11 percent to 9.45 billion euros and capital spending was 389 million euros, down from 417 million euros a year earlier.

The company said it expects energy and transport costs to be higher in 2007, relative to last year.

To contact the reporters on this story: Anne-Sylvaine Chassany in London at achassany@bloomberg.net; Brian McGee in Madrid at bmcgee3@bloomberg.net

Last Updated: August 2, 2007 06:20 EDT