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Lafarge Q3 profit falls

World Cement,

Lafarge has announced a 9% drop in operating income to €750 million for the third quarter (-7% like for like). Net profit in the quarter declined 10% to €336 million, but sales increased for both the quarter and year to date on the back of strong volume growth in the emerging markets.

The group stated that cost inflation and foreign exchange lowered overall results, while confirming that it had achieved €50 million of structural cost savings in the quarter and €150 million year to date, on pace with the €200 million full-year target.

The group’s cement sales increased 1% in the quarter (up 5% like for like) and 2% year to date (up 3% like for like), while volumes increased 6% in the quarter (7% year to date).

Aggregates and concrete sales were up 1% in the quarter (up 6% like for like) and 3% year to date (5% like for like). Current operating income declined 3% in the quarter, although it was up 1% year to date.

Lafarge’s investments totalled €892 million year to date, compared to €977 million in 2010, while capital expenditures in 2012 are planned to be no more than €1 billion for the year. The group received €364 million in cash for divestments year to date, including sales of minority stakes. Lafarge also made the strategic decision to divest its gypsum activities, and has secured over €2 billion of divestment proceeds for 2011 for debt reduction.

The group is also launching a new cost savings programme of €500 million for 2012 and plans to realise most of these savings next year.

Overall, the group continues to see cement demand moving higher and maintains its estimate of 2 – 5% market growth in 2011 compared to 2010, with the emerging markets continuing to be the main driver of demand and growth. Overall pricing is expected to be stable to slightly higher for the year in context of a higher cost inflation environment.

Lafarge’s Chairman and CEO, Bruno Lafont, said: “In the current economic environment, the group continues to be proactive and already secured over

€2 billion of divestments as part of its actions to reduce debt. These efforts will continue and today the group is announcing a new €500 million cost reduction programme. These measures, including price actions in response to a high cost environment, are part of ongoing steps to strengthen profitability, reduce debt and maintain strong liquidity.”

Meanwhile, Lafage has also announced that it has received €850 million with the closing of the sale of its European and South American gypsum assets to Etex Group. Lafarge will retain a 20% interest in the new partnership, allowing it to participate in the future upside of the business with Etex Group.

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