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Lafarge announces full year 2011 results

World Cement,

Lafarge has announced that higher cost inflation and the negative impact of foreign exchange has lowered its overall results for the full year 2011. Although full year sales increased 3% (+5% like for like) to €15.284 million, operating income fell 9% to €2.179 million. However, its current operating income has risen 3% in the fourth quarter (+1% like for like) to €538 million from higher sales volumes (up 5%), higher pricing and cost cutting measures.


The Group successfully achieved its €2 billion net debt reduction target and strengthened its liquidity. The strategic divestment of gypsum assets generated a net gain of €466 million.

Lafarge’s cost savings accelerated at the end of 2011, with €100 million delivered in the fourth quarter, achieving €250 million for the full year, above the €200 million target. As part of the announced programme to reduce costs by €500 million, the Group plans to reach at least €400 million of savings in 2012. Net earnings were impacted by a non-cash goodwill write-off of €285 million, mainly in Greece.

Meanwhile, the Group will implement its new country-based organisation project this year, to accelerate organic growth and innovation, as well as reinforce efficiency.

Bruno Lafont, Chairman and CEO of Lafarge, said: “In 2011 the Group met its debt reduction target of €2 billion despite a very challenging environment. Additional debt reduction will come in 2012 as the Group maximises its operational cash flows. We will drive a €500 million cost reduction programme, implement price actions as a response to cost inflation, further reduce capital expenditures to €800 million, execute strategic divestments of more than €1 billion, and propose a reduction of the dividend to 50 cents per share.” He continued: “Further to the divestment of a majority of the gypsum assets and the fundamental changes to the management structure, the Group has fully refocused on its core businesses of cement, aggregates and concrete. This strategic shift will accelerate growth and innovation.”


Overall, the Group sees higher cement demand and estimates market growth of between 1 to 4% in 2012 vs 2011. Lafarge expects higher pricing for the year and that cost inflation will increase at a lower rate than in 2011.


The Group’s cement sales were up 6% in the fourth quarter (up 7% like for like) and increased 3% for the year (up 4% like for like), reflecting volume improvements in emerging markets and favourable weather in the last quarter, partially offset by the negative impact of foreign exchange.

Volumes increased 6% in the quarter (up 5% like for like) and 7% for the year (up 5% like for like), with growth driven by emerging markets. Pricing moved 1% higher in the quarter vs last year and was stable for the year.

However, despite the Group’s cost reduction measures, higher cost inflation and foreign exchange weighed on results and margins.

Excluding the impact of the Egyptian clay tax provision reversal in 2010, fourth quarter current operating income grew 5%.

Aggregates and concrete

Sales moved up 4% in the quarter (up 7% like for like) and increased 3% for the year (up 5% like for like) driven by higher aggregates volumes and overall higher pricing. Current operating income increased 36% in the quarter (up 23% like for like) and increased 10% for the year (up 2% like for like) as volumes and pricing fully compensated for higher cost inflation and foreign exchange.

Investments, divestments and liquidity

Investments totaled €1.2 billion in 2011, compared to €1.3 billion in 2010. Capital expenditures for 2012 are planned to be no more than €800 million for the year.

Lafarge also announced that it had received €2.2 billion in cash for divestments in the year, including sales of minority stakes, and expects to divest more than €1 billion in 2012.

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