Results as of June 30, 2008

Euronext Paris: LG
07.31.2008
 

Second quarter operating results rise strongly: up 44% in emerging markets.

The Orascom acquisition and our strong positions in emerging markets maintain the Group's growth dynamic despite a volume slowdown in some developed markets.

 

The Board of Directors of Lafarge, chaired by Bruno Lafont, met on July 31, 2008 to approve the accounts for the period ended June 30, 2008. The Board congratulated the Group for the very fast recovery of its activities in Sichuan province, China, following the May 12 earthquake and for the strong support Lafarge has provided to employees and local communities. 300 houses were inaugurated recently to help affected employees resume normal life as quickly as possible.

 

 

First-half key figures

  • Sales up 8% to €9,069 million, up 14% at constant exchange rate
  • Current operating income up 18% to €1,611 million, up 24% at constant exchange rate
  • Strong improvement in operating margin, to 17.8% from 16.2% in 2007
  • Net income Group share up 15% to €773 M excluding one-off items*
  • Net earnings per share up 4% to €4.03 excluding one-off items*

 

Second quarter key figures

  • Sales up 8% to €5,069 million, up 15% at constant exchange rate
  • Current operating income up 8% to €1,099 million, up 14% at constant exchange rate
  • Net income Group share up 9% to €623 M excluding one-off items*
  • Net earnings per share down 2% to €3.24 excluding one-off items*

*Excluding the impact in 2007 of the disposal of the Roofing business and our Cement and Aggregates & Concrete operations in Central Anatolia, Turkey, and in 2008 the disposal of the Lafarge Titan joint venture in Egypt and the Gypsum provision adjustment.

 

 

Bruno Lafont, Chairman and Chief Executive Officer of Lafarge, declared:

 

"The Group's very good operational performance was achieved thanks to our strong positions in emerging markets and the well managed integration of Orascom.
The Group continued to accelerate its cost reductions across all operations and we are already responding to the stronger than expected volumes slowdown in some developed markets.
The acquisition of Orascom's highly performing assets, the 15 million tonnes of new cement capacity which come on stream in 2008 in fast growing markets, our next cost reduction plan and continuing progress in our sales of innovative products will allow us to meet our 2010 targets."

 

Outlook for 2008

  • We maintain our positive market outlook for the full year, with continued growth in emerging markets and a stronger than expected volume slowdown in some developed markets (United States, Spain, UK).
  • The fundamentals of our sector remain sound. There are considerable construction and infrastructure needs in emerging markets. We anticipate further growth in the world demand for cement. Lafarge is well armed to make the difference in 2008.
  • We foresee another year of growth in our Aggregates & Concrete business.
  • In light of further inflation in energy and transport, we continue to take all necessary steps to preserve our margins.
  • Additionally, the cost reduction program will continue to generate substantial savings in 2008. The initial target of €340 million will be exceeded to reach more than €400 million by the end of 2008.
  • We expect another increase in our earnings in 2008.
  • We confirm our 2010 targets of earnings per share of more than €15, ROCE after tax of more than 12% and free cash flow of more than €3.5 billion.

 

Group highlights

  • Strong contribution from emerging markets, with current operating income up 53% in the first half and 44% in the second quarter (+63% and +54% respectively, at constant exchange rate). Emerging markets accounted for 67% of earnings in our Cement business in the first half, 62% in the second quarter.
  • Continuing resilience of our operations in developed markets thanks to cost-cutting, strong pricing, improvements in industrial performance and the benefits of our innovation strategy.
  • Growth in current operating income affected by significant currency effect. At constant exchange rate, current operating income increased by 24% in the first half and 14% in the second quarter.
  • Solid pricing in a context of higher input costs.
  • Strong increase in operating margin - up 160 basis points in the first half to 17.8% - despite significant increase in energy and transport costs, underscoring the benefits of our cost reduction program.
  • Benefits of the Orascom acquisition, finalized at the end of January, which contributed to earnings growth. The integration process was completed at the end of June.
  • Continuation of our program to build new cement production capacity to meet strong demand for construction and infrastructure in emerging markets. 15 MT of new cement capacity to start in 2008.
  • With the L&T acquisition, announced on May 14, Lafarge will be the leader in concrete in India. As part of its divestment program, Lafarge announced on May 6 the disposal of its 50% stake in the Lafarge Titan joint venture in Egypt.

 

Consolidated accounts

 


Consolidated accounts
(€m) First half Second quarter
  2007 2008 Variation 2007 2008 Variation
Sales 8,385 9,069 + 8% 4,690 5,069 + 8%
Current operating income 1,360 1,611 + 18% 1,015 1,099 + 8%
Operating margin (%) 16.2% 17.8% + 160 bp 21.6% 21.7% + 10 bp
Net income Group share 934 911   572 761  
Net income Group share - Excluding one-off items* 673 773 +15% 572 623 +9%
Earnings per share (€) ** €5.38 €4.75   €3.31 €3.96  
Earnings per share (€) ** - Excluding one-off items */** €3.88 €4.03 +4% €3.30 €3.24 - 2%
Free cash flow 76 129 + 70% 263 307 +17%
Group net debt 9,445 17,323 + 83% - - -

 

*Excluding the impact in 2007 of the disposal of the Roofing business and our Cement and Aggregates & Concrete operations in Central Anatolia, Turkey, and in 2008 the disposal of the Lafarge Titan joint venture in Egypt and the Gypsum provision adjustment.
**Basic average number of shares outstanding of 191.8 million at the end of June 2008, compared to 173.7 million end of June 2007.

 

Current operating income

 


Current operating income
(€m) First half Second quarter
  2007 2008 Variation 2007 2008 Variation
Cement 1,070 1,380 + 29% 772 911 +18%
Aggregates & Concrete 244 237 - 3% 226 211 - 7%
Gypsum 82 31 - 62% 36 11 - 69%
Other (36) (37)   (19) (34)  
TOTAL 1,360 1,611 + 18% 1,015 1,099 + 8%

 

 

 

Highlight by business

 

 

Cement: Strong earnings growth

 

  • Sales +15% in the first half and +14% in the second quarter (+10% at constant scope and exchange rates in the first half and second quarter).
  • Current operating income rose strongly, +29% in the first half and +18% in the second quarter (+14% and +7% respectively, at constant scope and exchange rates).
  • The operating margin improved significantly to 24.1%, from 21.5% in first-half 2007.
  • Solid growth in emerging markets, which accounted for 67% of results in the first half, with particular strength seen in Central and Eastern Europe and in Asia. Overall, volumes in emerging markets increased by 7%.
  • Strong contribution of Orascom Cement, consolidated since the end of January 2008, supported by strong market growth.
  • Good resilience of our operations in developed countries, despite the slowdown in the United States, Spain and the UK.
  • Strong pricing at a time of higher energy and transport costs.
  • Positive impact of the cost-cutting program in all regions.

 

Aggregates and concrete: Tight cost controls, solid pricing

 

  • Sales -2% in the first half and -1% in the second quarter (flat at constant scope and exchange rates in the first half and the 2nd quarter).
  • Current operating income: -3% in the first half and -7% in the second quarter (-1% and -4%, respectively, at constant scope and exchange rates).
  • Solid pricing and cost reductions offset most of the decline in volumes due to the slowdown in the United States, Spain and the UK and of input cost increases.
  • Bolstered by our innovation strategy, value-added concrete products accounted for 23% of volumes in the first half of 2008, versus 20% in the same period last year.

 

Gypsum: Business hit by tough market conditions in the U.S.

 

  • Sales -3% in the first half and -2% in the second quarter (+2% and +4%, respectively, at constant scope and exchange rates).
  • Current operating income -62% in the first half and -69% in the second quarter (-60% and -66%, respectively, at constant scope and exchange rates).
  • Market conditions were still very difficult in the United States due to the downturn in the housing market.

 

Investment and divestments

 

  • Sustaining capital expenditure was slightly down at €353 million in the first half of 2008 (€389 million in 2007).
  • Development capital expenditure to increase production capacity totaled €663 million in the first half of 2008, compared to €336 million in 2007, reflecting the internal development program in Cement to meet higher demand in emerging markets. These investments were related in particular to the construction of new cement capacity in China, the US, India, South Africa, Poland, Ecuador, Morocco, Russia, Zambia, Indonesia and Chile, as well as in those countries where Orascom Cement is present.
  • Acquisitions totaled €8.7 billion and consisted mainly of the acquisition of Orascom Cement, effective as of January 23, 2008. The total acquisition price amounted to 8,3 billion euros and was financed through the issuance of 22.5 million shares for 2.5 billion euros and a syndicated credit facility.
  • Disposals amounted to €321 million, primarily relating to the sale of the 50% stake in the Lafarge Titan joint venture in Egypt.

 

Additinal information

 

 

Practical information:

 

Analyst/investor conference call on Lafarge's first-half results to June 30, 2008
Following the release of Lafarge's 2008 Half Year Results, a conference call will be held on:
July 31st, 2008 at 19:30 French time, in English
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 43 03
From UK, toll free (UK only): 0800 028 1299
From USA, toll free (US only): 1888 935 4575
International dial in number: +44 (0)20 7806 1966
Conference call name: "Lafarge"

 

Please note that a conference call playback will be available online through www.lafarge.com one hour after the end of the conference call.
You may also access it from 22:00, until August 8, at 00:00 AM French time at the following numbers:
From France: +33 (0)1 71 23 02 48
From UK, toll free (UK only): 0800 559 3271
From USA, toll free (US only): 1866 239 0765
International dial in number: +44 (0)20 7806 1970
Pin code for all numbers: 5640346#

 

Press meeting
A press breakfast with Bruno Lafont and Jean-Jacques Gauthier will be held on Friday, August 1, 2008 at 9 a.m. at Lafarge, 61 rue des Belles Feuilles, 75016 Paris, France.

 

 

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 90,000 employees in 76 countries, Lafarge posted sales of Euros 17.6 billion and net income of Euros 1.9 billion in 2007.
Lafarge is the only company in the construction materials sector to be listed in the 2008 ‘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.

 

This release may contain forward-looking statements. Such forward-looking statements do not constitute forecasts regarding the Company's results or any other performance indicator, but rather trends or targets, as the case may be. These statements are by their nature subject to risks and uncertainties as described in the Company's annual report available on its Internet website (www.lafarge.com). These statements do not reflect future performance of the Company, which may materially differ. The Company does not undertake to provide updates of these statements.

 
 
  • The press release (pdf, 93.54 KB)
  • The management report (pdf, 2.38 MB)
  • The slides for the analyst presentation (pdf, 684.61 KB)
  • The slides for the journalist presentation (pdf, 1.21 MB)