Lafarge Says Inflation, Currencies to Impact Profit Growth
Stock Chart for Lafarge SA (LG)
Lafarge SA (LG), the world’s biggest cement maker, said rising costs and foreign exchange fluctuations weighed on second-quarter profit and will hurt earnings growth for the full year.
Current operating profit declined to 702 million euros ($1 billion) from 838 million euros a year earlier, the Paris-based company said in a statement today. Analysts surveyed by Bloomberg had estimated 741 million euros. Sales were unchanged, and net income dropped 12 percent.
The company is “working to improve results” this year, Chief Executive Officer Bruno Lafont said on a conference call with journalists. “But we have to take into account an environment that’s more contrasted, more complex and more volatile than forecast.”
Standard & Poor’s cut Lafarge’s credit rating to below investment grade in March, saying profitability will struggle to recover because of rising raw material prices and political turmoil in Egypt. Lafont has pledged to reduce debt by at least 2 billion euros this year, with a 50 percent dividend reduction, asset sales and cost cuts.
Net debt was 14.3 billion euros at the end of the second quarter, compared with 15.2 billion euros a year earlier and 14 billion euros at the end of 2010.
Lafarge said today it is on track to meet its debt-cutting goal for the full year. The company has already sold or agreed to sell 1.8 billion euros of assets this year, the CEO said.
This month, Lafarge entered exclusive talks to sell most of its European and South American gypsum business to Etex Group for 850 million euros, and its Australian gypsum unit to Knauf International GmbH for 120 million euros.
In May, it agreed to sell U.S. cement and concrete assets with an enterprise value of $760 million to Cementos Argos SA. Three months earlier, Anglo American Plc and Lafarge agreed to combine U.K. building-material operations with the aim to generate annual cost savings of at least 60 million pounds. All four transactions have yet to be completed.
Lafarge’s net income fell 12 percent in the second quarter to 289 million euros from 329 million euros a year earlier, when it booked a capital gain. The French company reiterated forecast that cement demand in its markets will grow by 2 percent to 5 percent in 2011.
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