Lafarge retains a positive yearly outlook despite a fall in 1Q sales

The Board of Directors of Lafarge, chaired by Bruno Lafont, has approved the accounts for the quarter ended 31 March 2014.

1Q14 highlights

• Cement volumes improved by 11% y/y, with continuing strength in emerging markets and solid growth in most of the European countries.
• Adverse exchange rates continued to weigh on sales and EBITDA, with a negative impact of 8% and -10%, respectively (€-195 million on sales and €-29 million on EBITDA). Sales were down by 2% y/y during the quarter to €2.6 billion (up 9% on a like-for-like basis). EBITDA increased by 21% on a like-for-like basis and EBITDA margin was up 130 basis points, with a particularly good performance in Middle East Africa. Prices continued to increase in response to the inflation on costs.
• Cost reduction and innovation measures generated €801 million and €451 million, respectively, during 1Q14 and are on track to deliver more than €600 million in 2014.
• Net income in 1Q13 was impacted by €45 million one-time gains on divestments. Excluding this impact, 1Q14 net income improved by c.€30 million, underpinned by the improvement in current operating income. Operating income rose by 14% y/y to €146 million (up 69% on a like-for-like basis).
• The net result group share stood at €-135 million (€-0.47 per share), compared to €-117 million in 1Q13 (€-0.41).
• Net debt decreased by €1.3 billion compared to 1Q13, reflecting higher cash flows and the deleveraging actions taken by the Group.
• Free cash flows improved by 54%, reflecting the company’s efforts to reduce costs and optimise working capital and capital expenditures.

“Our first quarter results confirmed the positive trends experienced at the end of last year,” said Bruno Lafont, Chairman and Chief Executive Officer of Lafarge. “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 – 5% in 2014.

“We remain fully focused on achieving our objectives. We will generate more than €600 million additional earnings through cost savings and innovation and aim at bringing our net debt below €9 billion by the end of the year, applying the utmost capital allocation discipline. 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.”

Outlook

Lafarge continues to see cement demand increasing for the full year and estimates market growth of between 2 – 5% in 2014 versus 2013. Emerging markets continue to be the main driver of demand and the company will benefit from its well-balanced geographic spread of high quality assets.

Cost inflation should continue at a similar pace as in 2013, which should result in higher prices overall. As announced in 2013, the Group targets to reduce net debt to below €9 billion in 2014.

LafargeHolcim merger

On 7 April 2014, Lafarge and Holcim announced their project to combine the two companies through a merger of equals, unanimously approved by their respective Boards of Directors and fully supported by the core shareholders of both companies. Information on the project is available via the website.

Read Lafarge’s full Financial Report for 1Q14 here.

Adapted from press release by Rosalie Starling

Read the article online at: https://www.worldcement.com/europe-cis/06052014/lafarge_retains_a_positive_yearly_outlook_despite_a_fall_in_1q_sales_138/