France: Lafarge has reported that its net profit fell in the first half of 2012 due to troubles in its European markets, mainly in central and eastern Europe, where the construction industry slumped Lafarge recorded an impairment of Euro200m on its Greek assets alone. The French cement group's net income fell from Euro260m in the first half of 2011 to Euro13m in 2012, a drop of 95%.
Sales rose by 5% to Euro7.61bn and earnings before interest, taxes, depreciation and amortisation (EBITDA) rose by 8% to Euro1.52bn, boosted by increases in emerging markets. In addition to the impairment on Greek assets, Lafarge also recorded a Euro148m charge related to the company restructuring in the first half of 2012.
"Economic conditions remain challenging in many parts of the world and we remain prudent on our outlook," said Lafarge's chief executive Bruno Lafont. "Even in a lower growth volume environment, our actions to generate sales growth and cash, and to improve returns, led to a third consecutive quarter of positive trends." He confirmed that he expects the cement industry to grow between 1% and 4% in 2012, mainly driven by emerging markets. Lafarge expects higher pricing for the year and cost increases to be slower than in 2011.
By region on a like-for-like basis, cement volumes increased in North America by 14% to 5.7Mt and sales increased by 16% to Euro1.4bn. In Western Europe volumes decreased by 11% to 8.3Mt and sales decreased by 10% to Euro1.62bn. Here sales decreased by 6% to 7% in France and the UK, where it was blamed on adverse weather and a slowdown in advance of the London 2012 Olympic Games, and by 28% to 30% in Spain and Greece.
In Central and Eastern Europe volumes decreased by 7% to 5.9Mt, yet sales remained stable increasing by 1% to Euro561m. In both Russia and Poland higher pricing counteracted a drop in volume. In Middle East and Africa volumes decreased by 2% to 23.4Mt and sales increased by 4% to Euro2.2bn. Notably, Nigeria saw a 49% increase in sales due to a new line started in 2011 and Egypt saw volumes fall by 11% due to limited gas supply. In Latin America volumes increased by 5% to 4.5Mt and sales increased by 12% to Euro474m. In Asia volumes increased by 5% to 21.9Mt and sales increased by 11% to Euro1.36bn. Notably, activity slowed in India yet sales still rose by 25%. In China sales were impacted by slower construction growth, with volumes remaining stable but prices decreased.
Lafarge said that its debt stood at Euro12.55bn at the end of June 2012, down from Euro14.26bn a year earlier. The company's debts peaked at Euro17bn in 2008 and they stem from a series of acquisitions culminating in the Euro8.8bn takeover of Egyptian rival Orascom Cement. Lafarge plans to raise as much as Euro1bn in asset sales in 2012, though it hasn't said which units it may sell.
Lafarge made Euro72m from divestments in the first half of 2012. The company has also cut investment and reduced the number of executives. In June 2012, the company announced it would cut its costs by Euro1.3bn by 2015.