Lafarge Expands Cost Cuts After Surprise Fourth-Quarter Loss

Lafarge Reduces Dividend After Surprise Fourth-Quarter Loss
A truck leaves a Lafarge quarry in Sandrancourt, France. Photographer: Fabrice Dimier/Bloomberg

Feb. 17 (Bloomberg) -- Lafarge SA, the world’s biggest cement maker, will double cost cuts and put more assets up for sale to lower debt after reporting a surprise fourth-quarter loss amid writedowns.

The net loss was 3 million euros ($4 million) after a profit of 62 million euros a year earlier, the Paris-based company said in a statement today. Analysts surveyed by Bloomberg had expected a profit of 258 million euros. Operating income excluding some items rose 3 percent, beating estimates. The shares rose as much as 4.5 percent.

Chief Executive Officer Bruno Lafont is deepening cost cuts amid higher raw material prices as he seeks to repair a credit rating that has fallen below investment grade. Lafarge has earmarked 500 million euros in additional savings and will cut capital spending to 800 million euros, from 1.2 billion euros in 2011, Lafont said today. Asset disposals will exceed 1 billion euros, he said.

“We’re remaining cautious for 2012,” with a “contrasted situation” between growth in cement demand in emerging nations and a stabilization in developed nations, Lafont said on a conference call with journalists. “Debt will be significantly reduced” as Lafarge improves its cash flow, he said.


The stock rose 4 percent to 33.10 euros as of 9:16 a.m. in Paris as fourth-quarter earnings before interest, tax, depreciation and amortization of 798 million euros beat analysts’ estimates for 684 million euros.

Lafarge wrote down 285 million euros of assets, including about 180 million euros related to Greece, where demand has slumped, Lafont said. Lafarge proposed to cut the dividend to 50 cents a share. Last year, the company also reduced the payout by half.

Revenue in the fourth quarter rose 5 percent to 3.81 billion euros. The French company forecast that cement demand in its markets will grow by 1 percent to 4 percent in 2012, with moderating growth in emerging nations, a drop in Western Europe, and stable demand in North America.

Cost inflation, which was 6 percent in 2011, will slow in 2012, though will remain “significant,” Lafont said. “We’ve started implementing price increases announced in recent months, and we will of course continue,” he said.

Lafont announced 460 job cuts this month as part of plan to lower costs. Standard & Poor’s and Moody’s Investors Service cut the company’s credit rating to below investment grade in 2011. Net debt stood at 12 billion euros at the end of the fourth quarter, compared with 14 billion euros a year earlier, meeting Lafont’s plan to reduce debt by at least 2 billion euros.

Gypsum Sale

Lafont lowered costs by 250 million euros in 2011 , pushed through the dividend reduction, and sold 2.2 billion euros of assets, including more than half of Lafarge’s gypsum business and some cement plants in the U.S.

Of the 500 million euros in savings planned in total, 400 million euros will come this year, Lafarge said today. Half of the cost cuts will be on general and fixed industrial costs, 20 percent will come from productivity gains, and 30 percent from energy savings, Lafont said.

To contact the reporter on this story: Francois de Beaupuy in Paris at

To contact the editor responsible for this story: Benedikt Kammel at