Lafarge ‘ideally positioned’ for merger

By Sandy Guthrie07 May 2014

Bruno Lafont - Chairman and CEO of the Lafarge Group

Bruno Lafont - Chairman and CEO of the Lafarge Group

First quarter figures from Lafarge show that cement volumes improved 11%, with continuing strength in emerging markets and solid growth in most European countries.

Lafarge and Holcim – two of the world’s largest construction materials producers – revealed last month that they are proposing a merger.

Lafarge said of its first quarter results that, as expected, adverse exchange rates had continued to affect sales and EBITDA (earnings before interest, taxes, depreciation and amortization). It said there had been a negative impact of -8% (€195 million) on sales, and -10% (€29 million) on EBITDA.

It said, however, that like-for-like figures showed that EBITDA had increased 21%, with a particularly good performance in the Middle East and Africa region.

Lafarge said, “The solid operational trend overall reflects volume growth combined with the impact of our actions to reduce costs and promote innovation. Our prices continued to increase in response to the inflation on costs.”

It added that net income in the first quarter of 2013 had seen an impact from €45 million one-time gains on divestments. Excluding this, first quarter 2014 net income was said to be improving by around €30 million, underpinned by an improvement in current operating income.

Bruno Lafont, chairman and CEO of Lafarge, said, “Our first quarter results confirmed the positive trends experienced at the end of last year.

“Our volumes were supported by continuing growth in emerging markets and the progressive improvement in several European markets. North America was affected by a harsh winter but the underlying market trends are positive. Our outlook for the year is confirmed and we expect to see cement demand growth in our markets of between 2 and 5% in 2014.”

He said Lafarge would generate more than €600 million additional earnings through cost savings and innovation, and would aim to bringing net debt below €9 billion by the end of the year, “applying the utmost capital allocation discipline”.

He went on, “Thanks to our actions, the group is ideally positioned to take the next step of its development with our project to create LafargeHolcim, the most advanced group in building materials, through a merger of equals.

“This project will sustainably generate superior value and new opportunities for our customers, our employees, local communities and our shareholders."

Lafarge said emerging markets continued to be the main driver of demand, and added that it would benefit from its “well-balanced geographic spread of high quality assets”.

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