• Friday, March 01, 2024
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BusinessDay

Lafarge quarterly profit beats estimates on asset sales

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Lafarge SA, the world’s second-biggest cement maker, reported fourth-quarter earnings that beat analyst estimates, helped by a rebound in revenue in some markets and the sale of assets in Honduras.

Net income rose to 213 million euros ($293m) from 83 million Euros a year earlier, the Paris-based company said in a statement. Analysts had predicted a profit of 198 million euros. The sale of operations in Honduras contributed 172 million euros, the company said. The stock gained as much as 3.2 percent in Paris trading.

“We saw much more positive operational trends, accelerating compared to the third quarter while exchange rates continued to be adverse,” said CEO Bruno Lafont, as “we will continue to apply the utmost discipline in capital allocation and our aim is to return to an investment grade this year.”

Lafont has been slashing costs, pushing sales of higher-margin products and services, and selling assets to repair a credit rating that has fallen one level below investment grade, following a slump in European construction, political turmoil in the Middle East, and rising energy prices. The company said demand was rising again.

Lafarge forecast that cement demand will grow by 2 percent to 5 percent this year in the markets where the company operates, led by the US and emerging markets while Europe stabilises.

Cost inflation will slow “slightly” to 3.8 percent this year, said Lafont on a conference call with journalists.

The stock gained as much as 1.69 euros to 54.29 euros, valuing the company at 15.5 billion euros.

Net debt shrank to 10.3 billion euros at the end of December from 11.3 billion euros a year earlier, as the company sold 1.3 billion euros of assets, the cement maker said.

Lafont, who had aimed to bring borrowings below 10 billion euros at the end 2013, reiterated a goal to cut debt below 9 billion euros at the end of 2014. The company sold 380 million euros of assets in recent weeks, including a stake in a gypsum business and aggregates assets in Maryland. The CEO said he’ll continue to make “selective” divestments.

The cement maker proposed to pay a dividend of 1 euro per share this year, unchanged from last year.

Lafarge plans to invest 1.1 billion euros in maintenance and new capacities this year after spending 1.07 billion euros in 2013 to increase output in countries including India, Russia, the US and Canada, the CEO said.

It’s also adding new capacities in the Philippines, Brazil and Algeria, Lafont said. The company also plans to add more than 10 million tons of cement capacities over four years in sub-Saharan nations where it already operates, such as Nigeria, Tanzania and Zambia, to take advantage of accelerating demand.

Lafarge’s earnings before interest, taxes, depreciation and amortisation fell to 793 million euros in the fourth quarter from 844 million euros a year earlier, hurt by the stronger euro and weaker sales of carbon emission rights.