Lafarge SA (LG), the world’s biggest cement maker, is seeking a buyer for its cement operations in South Africa in a transaction that may fetch $700 million to $800 million, two people familiar with the situation said.
Potential bidders may include India’s Aditya Birla Group, said one of the people, who declined to be identified because the plan is private. Lafarge, based in Paris, has more than 3 million tons of cement capacity in South Africa and doesn’t break out financial results from the country.
Chief Executive Officer Bruno Lafont has sold assets to help meet a goal of cutting debt by about 2 billion euros ($2.63 billion) this year. He plans to reduce debt further in 2012 and bolster profit by raising prices, stepping up savings and divesting more assets. Standard & Poor’s and Moody’s Investors Service cut Lafarge’s credit rating to below investment grade this year.
The company will have difficulty restoring profitability because of rising raw-material prices, political turmoil in the Middle East and a construction slump in countries such as the U.S., Spain and Greece, the credit-rating companies said.
In response, Lafarge sold more than half of its gypsum business to buyers including Etex Group (ETEVP), and divested some cement and ready-mix plants in the U.S. to Cementos Argos SA. Its net debt was 14.3 billion euros at the end of the third quarter, compared with 14.7 billion euros a year earlier.
Lafarge spokeswoman Christel des Royeries declined to comment. Pragnya Ram, a spokeswoman for the Aditya Birla Group, wasn’t immediately available for comment.
Shares of the French cement supplier fell 1.5 percent to 25.91 euros at the close of trading today.
UltraTech Cement Ltd., owned by the Aditya Birla Group, is India’s largest producer of the commodity, with capacity of 52 million metric tons. The company produced 32.9 million tons of cement in the fiscal year ended March 31. The Aditya Birla group owns 63.3 percent of UltraTech Cement.
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