Record 2007 First Half with Earnings up sharply in the Second Quarter

Euronext : LG, NYSE : LR
08.02.2007
 

The Board of Directors of Lafarge, chaired by Bruno Lafont, met on August 1st 2007 to approve the accounts for the half year ending June 30 2007.

KEY FIGURES UP IN H1

 

  • Sales up 4% to €8,385 million
  • Current operating income up 20% to €1,360 million
  • Net income Group share up 70% to €934 million
  • Earnings per share up 71% to €5.38

FURTHER GROWTH IN Q2

  • Sales up 2% to €4,690 million
  • Current operating income up 11% to €1,015 million
  • Net income Group share up 17% to €572 million
  • Earnings per share up 18% to €3.31

GROUP HIGHLIGHTS IN H1 2007

  • Record first half - Strong organic growth: sales up 6% in second quarter and 8% in first half at constant scope and exchange rates.
    • Cost reductions implemented throughout the Group, in line with our Excellence 2008 program.
    • Current operating income in our North American Cement and Aggregates & Concrete businesses is up 21% in the first half.
    • Operating margin is up 210 basis points in first half.
    • Cash flow from operations increases by 19% in the second quarter and 13% in the first half (+24% excluding one-offs).
    • Exchange rate fluctuations are significant: at constant exchange rates, current operating income is up 15% in the second quarter and up 24% in the first half.
    • Excluding capital gains on Roofing and Turkey disposals, earnings per share is up 23% in the first half and 18% in the second quarter.
  • Divestment of the Roofing business and of our activities in Central Anatolia, Turkey.
  • Share buy-back of 1.8% of the Group's capital.
  • Launch of two new value-added concrete products, Extensia and Chronolia, in France, the UK and North America.
  • Announcement of our "Sustainability Ambitions 2012", our road-map towards sustainable leadership.
  • Appointment of new Group Executive Committee.

BRUNO LAFONT, CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF LAFARGE, COMMENTED:

"The increase in our earnings in the first half reflects the structural improvement in our operations and the cost reductions implemented throughout the Group. Our margins are up sharply. The quality of the results of our North American operations in the current market environment is worth highlighting. We are confident for the second half of the year."

CONSOLIDATED FINANCIAL STATEMENTS AT JUNE 30, 2007


Consolidated financial statements as of 30 June 2007
In M€ 6 months Q2
2006 2007 Variation 2006 2007 Variation
Sales 8,054 8,385 + 4% 4,576 4,690 + 2%
Current operating income 1,134 1,360 + 20% 916 1,015 + 11%
Net income Group share 548 934 + 70% 490 572 + 17%
Earnings per share in € 3.14€ 5.38€ + 71% 2.81€ 3.31€ + 18%
Cash flow from operations 1,164 1,310 + 13% 926 1,102 + 19%
Excluding exceptionals* 1,164 1,439 + 24% 926 1,102 + 19%
Group net debt 10,610 9,445 -11%

 

* Cash flow from operations for the first quarter of 2007 includes an exceptional contribution of €129 million to the UK pension fund.

CURRENT OPERATING INCOME AT JUNE 30, 2007


Current operating income as of 30 June 2007
In M€ 6 months Q2
2006 2007 Variation 2006 2007 Variation
Cement 871 1,070 + 23% 672 772 + 15%
Aggregates & Concrete 188 244 + 30% 206 226 + 10%
Gypsum 110 82 - 25% 62 36 - 42%
Other (35) (36) (24) (19)
TOTAL 1,134 1,360 + 20% 916 1,015 + 11%

H1 2007 HIGHLIGHTS BY BUSINESS

CEMENT

  • Sales up: + 5% to €2,779 million in the second quarter; +7% to €4,974 million in the first half.
  • Current operating income up: +15% in the second quarter; +23% in the first half.
  • Strong improvement in operating margin: 21.5% compared to 18.8% in the first half of 2006.
  • Positive trends in most of our markets.
  • Higher earnings in North America, in spite of the impact of the residential market slowdown.
  • Strong increase in earnings in Central and Eastern Europe, and in Asia.
  • Sustained price increases, against a background of higher energy and transportation costs.
  • AGGREGATES & CONCRETE

  • Sales stable at €1,724 million in the second quarter; up 1% to €3,002 million in the first half.
  • Current operating income up: +10% in the second quarter; +30% in the first half.
  • Improvement in operating margin, to 8.1% compared to 6.3% in the first half of 2006.
  • Positive pricing trends.
  • Increased contribution from value-added concrete products.
  • GYPSUM

  • Sales stable at €826 million in the first half.
  • Current operating income and operating margin down, due to residential market slowdown in North America.
  • Strong increase in results in all other markets.
  • CAPITAL EXPENDITURE AND DISPOSALS IN THE FIRST HALF OF 2007

  • In the first half, investments mainly concerned the following operations:
    • Development capital expenditure, to increase production capacity, totaled €336 million in the first half (€213 million in the first half of 2006). These investments are part of our program to build 45 million tons of cement production capacity, and include the reconstruction of our Aceh plant in Indonesia, as well as the construction of new production lines in Zambia, China, India, Ecuador and South Africa. They also include new plasterboard production lines at Silver Grove (U.S.) and in the United Kingdom, as well as several debottlenecking investments at our Cement operations in France, Spain and Nigeria.
    • Sustaining capital expenditure totaled €389 million in the first half (€417 million in the first half of 2006).
    • Acquisitions totaled €877 million (€3,061 million in the first half of 2006). They include the purchase of a 26% stake in Heracles, in Greece, for €322 million, raising the Group's stake to 79.17%; a 35% interest in the new entity Lafarge Roofing for €217 million; the acquisition of aggregates activities in the Chicago region; and the acquisition of Cimpor shares on the market for a total of €150 million. As at 31 July 2007, Lafarge holds a 17% stake in Cimpor.
    • Disposals mainly related to the sale of our Roofing business to PAI Partners and the sale of our Cement, Aggregates & Concrete business in Central Anatolia, Turkey.

    OUTLOOK FOR 2007

  • The positive trends observed in the first half confirm our positive market outlook for 2007, with strong growth expected in emerging markets.
      - In the Cement business, we anticipate strong demand and high prices on the whole, in spite of a slowdown in market conditions in North America.
      - We expect another year of growth for our Aggregates & Concrete business in 2007, with particularly strong performance in emerging markets.
      - For the Gypsum business, 2007 should be a good year in Western and Eastern Europe and in Asia, in terms of both volumes and prices. Our North American operations should, however, be strongly impacted by the residential market slowdown.
  • Energy and transport costs are expected to be higher in 2007.
  • The action plans developed to reduce costs in all our businesses and all countries as part of our "Excellence 2008" strategic plan should generate substantial cost savings in 2007.

OSCAR FANJUL APPOINTED NON EXECUTIVE VICE CHAIRMAN OF THE LAFARGE BOARD OF DIRECTORS

The Board of Directors of Lafarge, at a meeting on August 1st chaired by Bruno Lafont, appointed Oscar Fanjul as non-executive Vice Chairman of the Board. Oscar Fanjul, 57, has been an independent member of the Lafarge Board since 2005. He was founding Chairman and CEO of Repsol YPF, the Spanish energy group, from 1985 to 1996. He is now Honorary Chairman of Repsol. He is also a director of the boards of Areva, Marsh & McLennan and the London Stock Exchange.
BRUNO LAFONT, CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF LAFARGE, STATED:

"I am delighted that Oscar Fanjul has agreed to bring his experience and remarkable skills to foster continuous improvement in the governance of our Board of Directors."

NOTES TO EDITORS
Lafarge is the world leader in building materials, with top-ranking positions in all of its businesses: Cement, Aggregates & Concrete and Gypsum. With 71,000 employees in over 70 countries, Lafarge posted sales of Euros 17 billion and net income of Euros 1.4 billion in 2006.
Lafarge is the only company in the construction materials sector to be listed in the 2007 ‘100 Global Most Sustainable Corporations in the World'. Lafarge has been committed to sustainable development for many years, pursuing a strategy that combines industrial know-how with performance, value creation, respect for employees and local cultures, environmental protection and the conservation of natural resources and energy. To make advances in building materials, Lafarge places the customer at the heart of its concerns. It offers the construction industry and the general public innovative solutions bringing greater safety, comfort and quality to their everyday surroundings.

Practical information:
Analysts & Investors conference call on Second Quarter Results to June 30, 2007
Following the release of Lafarge's Second Quarter Results to June 30, 2007, a conference call will be held on: August 2nd, 2007 at 02:00 PM CET, in English (01:00 PM UK time; 08:00 AM EDT in North America), hosted by Jean-Jacques Gauthier, Chief Financial Officer
If you wish to participate in the conference call, please dial:
From France: +33 (0)1 70 99 42 97
UK and International dial in number: +44(0)20 7806 1968
From USA, toll free (US only): +1718 354 1391
Conference call name: "Lafarge" Please note that a playback will be available:
online through this website one hour after the end of the conference call, or by phone, from August 2nd, 2007 at 17:30 CET, to August 10th, 2007 at 00:00 AM CET at the following numbers:
From France: +33 (0)1 71 23 02 48
UK and International dial in number: +44 (0)20 7806 1970
From USA, toll free (US only): +1 718 354 1112
Pin code for all numbers: 2761428#

Statements made in this press release that are not historical facts, including statements regarding our expectations on market trends, price increases, energy costs, cost reduction and growth in our results, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions ("Factors"), which are difficult to predict. Some of the Factors that could cause actual results to differ materially from those expressed in the forward-looking statements include, but are not limited to: the cyclical nature of the Company's business; national and regional economic conditions in the countries in which the Group does business; currency fluctuations; seasonal nature of the Company's operations; levels of construction spending in major markets; supply/demand structure of the industry; competition from new or existing competitors; unfavorable weather conditions during peak construction periods; changes in and implementation of environmental and other governmental regulations; our ability to successfully identify, complete and efficiently integrate acquisitions; our ability to successfully penetrate new markets; and other Factors disclosed in the Company's public filings with the French Autorité des Marchés Financiers and the US Securities and Exchange Commission including its Reference Document and annual report on Form 20-F. In general, the Company is subject to the risks and uncertainties of the construction industry and of doing business throughout the world. The forward-looking statements are made as of this date and the Company undertakes no obligation to update them, whether as a result of new information, future events or otherwise.

 
  • The press release (pdf, 54.5 KB)
  • The management report (pdf, 419.95 KB)
  • The presentation slides for the analysts (pdf, 1012.22 KB)
  • The details for the conference call (pdf, 29.24 KB)