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Lafarge sees signs of improvement in key markets

World Cement,

Group highlights

  • Increase in current operating income in the second quarter.
  • Slower cement volumes decline between the first and second quarter.
  • Growth of EBITDA margin for the Cement division of 110 basis points to 32.7% in the second quarter, stable year-to-date, despite lower volumes.
  • Strong EBITDA margins in Middle East Africa region at 34.7% in second quarter, although operating results impacted by lower volumes in some markets.
  • Achievement of €200 million total cost savings year-to-date, of which €120 million are structural.
  • Impact of higher restructuring charges in 2010 on net income.
  • Foreign exchange translation raising net debt by €1 billion compared to year-end.
  • Strong cash and recent refinancing enhancing liquidity position.

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

“In a second quarter marked by a mixed economic environment, with volume decreases in a number of markets but with early signs of improvement in some developed countries, Lafarge achieved a solid operational performance and firm margins. Divestments of non-strategic assets continued and we should exceed €500 million in 2010, going beyond our initial target.

Halfway through the year, given the uncertain pace of economic recovery and the contrasted situation from one country to another, we have readjusted our 2010 full year market outlook. In this context, the Group is limiting 2011 investments to 1 billion euros to further reduce debt and enhance its flexibility.

“Despite this caution due to the current context, we confirm our confidence in the underlying fundamentals of cement demand, driven by urbanisation, demographics and infrastructure needs, which represents the platform of future growth of the Group. Our portfolio, supported by the significant capacities we have added to emerging markets over the past years, is well positioned to capture this growth.”


Based on demand trends seen through the second quarter, the Group has reduced its growth estimates in its markets and expects cement demand to be between -1 to +3 percent in 2010 as compared to 2009.

Based on second quarter activity, Lafarge has lowered its full year volume estimates for Western and Eastern Europe and increased volume estimates for North America.

Continued market growth is expected in the Asia, Latin America and Middle East Africa regions. Due to supply-demand evolution in some countries, volume trends for the Group may temporarily be impacted and it is taking action to mitigate the impact of these situations.

Structural 2010 cost savings should exceed the target of €200 million for the year.

Pricing is expected to remain solid through the year, despite lower prices in some markets.

The Group takes additional actions for 2011 to further reduce its debt level, including a new target of more than €200 million structural cost savings and the reduction of capital expenditures to no more than 1 billion euros.

Highlights by business


  • Sales were up 1% in the quarter and down 4% year-to-date, reflecting the impact of lower volumes partially offset by the stronger benefit of foreign exchange in the second quarter.
  • Volume declines slowed from -5% in Q1 to -4% in Q2 on a like for like basis, reflecting a return to volume growth of 10% for North America in the second quarter.
  • Volumes in emerging markets were -6% for the quarter and -5% for first-half on a like for like basis due to market downturn in Eastern Europe and some new capacities in Middle East Africa.
  • Pricing remained stable overall.
  • Cost reduction program strongly benefited all regions.
  • EBITDA margin grew 110 basis points to 32.7% in the quarter and was stable year-to-date.
  • Current operating income up 3% in the quarter thanks to developed markets returning to income growth and favorable foreign exchange, but down 6% year-to-date due to lower overall volumes.

Aggregates & concrete

  • Sales moved up 1% in the quarter due to volume growth for aggregates and slower rates of volume decline in the ready mix concrete business and were down 6% year-to-date.
  • EBITDA margin was stable both year-to-date and in the quarter.
  • Current operating income was stable in the quarter, reflecting the impact of strong cost reduction measures.


  • Sales were up 10% in the quarter and up 4% year-to-date as volume growth compensated for lower pricing.
  • Current operating income was slightly higher for the quarter and first half, benefiting from higher volumes and the strong impact of cost reduction in all regions.

Investments, divestments and liquidity

  • Investments totaled €718 million in first half 2010, compared to €884 million in first half 2009.
    • Sustaining capital expenditures decreased by 14% to €116 million in 2010.
    • Internal development capital expenditures were down 19% to €550 million in 2010.
    • Acquisitions were €52 million in H1 2010, slightly below last year.
  • In the first half, Lafarge received €105 million in cash for divestments and in total has secured €350 million to date.

As of June 30, 2010, the Group had €3.8 billion in committed credit lines with an average maturity of 2.5 years in addition to €2.8 billion of cash on hand. All Lafarge SA long-term debt obligations due in 2010 have been refinanced and extended for three to eight years as of July 30, 2010. There are no financial covenants on debt at the Lafarge SA level.

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