Lafarge recently released its 2011 second quarter report, which showed strong cement growth in the context of a high cost inflation environment. The Group, a world leader in building materials with 76 000 employees in 78 countries, posted sales of €16.2 billion in 2010.
Sales increased on a like for like basis in all product lines for both the quarter and first-half, thanks to strong volume growth driven by continued strength in emerging markets.
Cost inflation and foreign exchange lowered overall results and is expected to impact earnings growth for the full year. The Group achieved €50 million of structural cost savings in the quarter and €100 million year-to-date, on pace with the €200 million full-year target.
The Group announced a project to sell its European and South American Gypsum operations to Etex Group for an enterprise value of €1 billion while also maintaining a stake of 20% in the new entity.
In addition to the significant divestment to Etex, the Group has secured €700 million out of the €750 million divestments targeted for 2011 and is on track to achieve at least €2 billion of debt reduction in 2011.
Cement prices moved progressively higher from the fourth quarter 2010 to second quarter 2011, but were slightly down compared to the first-half last year.
Sales were stable in the quarter (up 3% like for like) and up 3% in the first-half (up 3% like for like), reflecting volume improvements in emerging markets and new capacities acquired in Brazil, offset by the negative impact of foreign exchange.
Volumes increased 9% in the quarter (up 6% like for like) and 8% in the first-half (up 5% like for like), with growth driven by the Middle East and Africa region and other emerging markets.
Pricing was below first half 2010 levels, but progressively moved higher compared to fourth quarter 2010. Despite the Group’s cost reduction programme, higher cost inflation and foreign exchange put pressure on results and margins.
Bruno Lafont, the company’s Chairman and Chief Executive Officer said in a press statement, “While I am encouraged by the return to cement volume growth for the last several quarters, the impact of high inflation and a slow recovery of mature markets weighed on the cement sector.”
“The business will continue to benefit from volume growth thanks to our continued development in emerging markets,” he added.
Overall the Group continues to see cement demand moving higher and estimates market growth of between 2 – 5% in 2011 versus 2010. Emerging markets continue to be the main driver of demand and Lafarge benefits from its well balanced geographic spread of high quality assets.
Overall pricing is expected to be stable to slightly higher for the year in the context of a high cost inflation environment.
Read the article online at: https://www.worldcement.com/europe-cis/28072011/lafarge_releases_second-quarter_results/