Lafarge Lines Up More Assets for Disposal as Profit Declines
Lafarge SA (LG), the world’s biggest cement maker, said it will sell more assets to cut debt after a deterioration in European demand and poor weather for construction work cut second-quarter profit.
The French company is looking for additional proceeds to bring borrowings down to below 10 billion euros ($14 billion) this year, and then to 9 billion euros in 2014, to regain an investment grade “as soon as possible,” it said.
Weakened construction industries in Europe is putting the emphasis on self-help measures. Chief Executive Officer Bruno Lafont is cutting jobs and procurement costs and pushing sales of higher-margin services and products. Earnings before interest, taxes, depreciation and amortization fell 8 percent from a year earlier to 922 million euros, short of the 937 million euros that analysts estimated, on average.
“Our results in the second quarter resisted in an environment which was marked by a conjunction of unfavourable circustances,” Lafont said.
As well as a European slump, Lafarge had to contend with a prolonged winter in its home region, political turmoil in the Middle East and a temporary fuel shortage in Egypt. Asset sales are part of the CEO’s drive to repair a credit rating that has fallen one level below investment grade.
Net income quintupled to 201 million euros in the quarter, compared to an average estimate of 230 million euros.
Lafarge’s debt shrank by 5 percent at the end of second quarter from a year earlier to 11.9 billion euros. It has secured 1.5 billion euros of asset sales since the start of 2012, of which 900 million euros will be received in the second half, it said.
In January, Lafarge announced the sale of aggregates quarries in the U.S. for $160 million, and merged some U.K. assets with Anglo American (AAL)’s Tarmac unit. Lafarge also agreed to sell a cement plant in Ukraine to CRH Plc (CRH) for 96 million euros, raise 200 million euros in May through a capital increase at its India unit as well as divesting its North American gypsum unit for $700 million to Lone Star Funds in June.
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