Lafarge to Get Asset-Sale Boost From Start of European RecoveryFrancois de Beaupuy
Lafarge SA Chief Executive Officer Bruno Lafont said a recovery in European cement markets will help an asset-sale program needed to get its planned $40 billion merger with Holcim Ltd. approved by authorities.
“It seems like the time is favorable, with prospects of a pickup in Europe, the abundance of liquidity and funds that are ready to be invested, and interest rates that are still low,” Lafont said in an interview in Paris today. “It gives confidence on our ability to complete” asset sales as the companies strive to close the deal by the end of the first half.
The French and Swiss cement makers this month detailed a list of assets for sale to obtain antitrust approvals for their merger that will create a company that dwarfs their next nearest competitor HeidelbergCement AG. They have already received “high quality” interest in the assets, and banks advising on the sales will send out initial information to potential buyers next week, Lafont said.
Lafarge is also continuing its own divestment plan ahead of the combination. 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.
“Speed is very important, and for speed we need some simplicity,” Lafont said. “Certainty of execution is very important because we want to be on time and we don’t want to delay the merger, and value is also important.”
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 to repair a credit rating that has fallen one level below investment grade.
Lafarge 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.
Earnings before interest, taxes, depreciation and amortization fell 2 percent from a year earlier to 812 million euros. Analysts had estimated profit of 816 million euros, on average.
Pressure from exchange rates, which trimmed revenue and Ebitda by 7 percent in the quarter, will ease in the remainder of the year and demand in parts of its home market are now getting livelier, Lafont said.
“North America is improving, growth continues in emerging markets, and we see the first signs of recovery in Europe,” he said, citing Greece, the U.K. and Poland. Lafarge is budgeting for cement demand in its markets to grow by 2 percent to 5 percent this year.
Shares of Lafarge rose 0.5 percent to 62.18 euros at 1:05 p.m. in Paris, taking their gain this year to 14 percent.