Lafarge Holds Profit Steady as It Drives on With Holcim Deal

Lafarge SA held profit steady in the second quarter as costs cuts helped offset a stronger euro, helping keep the French cement company on track to complete a $40 billion merger with rival Holcim Ltd. of Switzerland.

Earnings before interest, taxes, depreciation and amortization fell 2 percent from a year earlier to 812 million euros ($1.09 billion), the Paris-based company said in a statement today. Analysts had estimated profit of 816 million euros, on average.

“Our margin improvement reflects our success in reducing costs and promoting our innovative products and solutions,” Chief Executive Officer Bruno Lafont said on a call to journalists. The negative impact of exchange rate fluctuations, which trimmed revenue and Ebitda by 7 percent in the quarter, “will strongly decline” in the second half.

Lafarge said the combination with Holcim, to be completed in the first half, is going according to plan. The cementmaker is struggling to revive earnings because of a lingering construction slump in parts of Europe, rising global energy prices and strengthening competition from emerging market players.

Lafont has been selling assets to repair a credit rating that has fallen one level below investment grade. Net debt shrank to 10.1 billion euros at the end of June from 11.2 billion euros a year earlier, and the CEO reiterated a pledge to cut debt to below 9 billion euros by the end of 2014.

Disposal Proceeds

The French company is due a windfall of about 700 million euros in the second half from divestments in Ecuador and Pakistan, on top of 423 million euros in proceeds in the first half.

Lafarge and Holcim this month detailed a list of assets for sale to obtain antitrust approvals for their merger, and have received “marks of interest,” Lafont said. The disposals will be done “as quick as possible,” he said.

Lafarge also reiterated a forecast that cement demand will grow by 2 percent to 5 percent this year in the markets where the company operates.

“North America is improving, growth continues in emerging markets, and we see the first signs of recovery in Europe,” citing Greece and Poland Lafont said.

The shares were up 0.2 percent to 61.95 euros at 9:14 a.m. in Paris, taking their gain this year to 14 percent.