France: The French multinational cement producer Lafarge has reported that its earnings before interest, tax, depreciation and amortisation (EBITDA) fell year-on-year in the second quarter of 2013. Despite this Lafarge said that its EBITDA was 'steady' considering the adverse weather conditions, absence of carbon dioxide sales and the negative impacts of foreign exchange variations seen during the quarter.
EBITDA for the second quarter of 2013 was recorded as Euro922m, 8% down on the second quarter of 2012 when it was Euro1002m. Operating income was also down from Euro750m in the second quarter of 2012 to Euro667m in the second quarter of 2013. However, Lafarge's net income for the quarter was Euro201m, significantly up on the same period of 2012 due to exceptional items during the year-ago quarter relating to Greek assets. It reported that it generated a total of Euro260m in the first half of 2013, which Lafarge described as 'on track' with its plan.
The group sold a total of 36.5Mt of cement in the second quarter compared to 38.4Mt in the second quarter of 2012. It sold 65.2Mt/yr of cement in the first half of 2013 against 69.7Mt sold in the first half of 2012.
Lafarge's net debt at the end of June 2013 was down by Euro0.7bn compared to at the end of June 2012, reflecting the strict control of investments and working capital optimisation. With the recently announced divestment of its US gypsum operations, the group has secured Euro1.5bn since the beginning of 2012. Euro0.9bn more will come in the second half of 2013.
Bruno Lafont, Chairman and Chief Executive of Lafarge, said, "Our results in the second quarter resisted in an environment that was marked by a conjunction of unfavourable circumstances. We increased prices and performance and innovation results are in line with our 2013 Euro650m additional EBITDA target. Taking into account first-half volumes, we foresee a cement demand growth in our markets of 0-3% in 2013, which implies more positive trends in the second half."
Lafarge's sales volumes across all business lines were down in the second quarter of 2013. It suggested that this was in part due to a better-than-expected 2012 performance and poorer weather in 2013, especially in North America. A temporary fuel shortage in Egypt also put some pressure on cement volumes in that country.
Across all business units Lafarge's EBITDA in North America was Euro141m in the second quarter of 2013, down by 17% (8% on a like-for-like basis) compared to Euro170m in the same period of 2013. EBITDA for this region was flat year-on-year despite the loss of assets in the US cement industry. This represents a like-for-like improvement of 17%.
In Western Europe, Lafarge's EBITDA was Euro145m, down by 16% (14% like-for-like) compared to Euro173m in the second quarter of 2012. In the first half overall its EBITDA plummeted by 45% (38% like-for-like) from Euro255m in 2012 to Euro150m in 2013.
In Central and Eastern Europe, EBITDA was also down in the second quarter, from Euro101m in 2012 to Euro80m in 2013. This was a 21% fall in both absolute and like-for-like terms. In the first half of 2013 its performance was similarly poor, with a 48% drop in EBITDA from Euro87m in the first half of 2012 to Euro45m in the first half of 2013.
The Middle East and Africa saw an 8% decline in EBITA in absolute terms (1% like-for-like) from Euro329m in the second quarter of 2012 to Euro304m in the second quarter of 2013. Over the first half of 2013 its EBITDA for this region fell by 15% in absolute terms (10% like-for-like) from Euro646m in 2012 to Euro550m in 2013.
Latin America, however, saw a 1% improvement (7% like-for-like) in EBITA year-on-year from Euro70m in the second half of 2012 to Euro71m in the second quarter of 2013. In the first half its EBITDA for this region fell by 5% year-on-year (up 1% like-for-like) from Euro129m in 2012 to Euro122m in 2013.
Finally, Lafarge's best performing region was Asia, where it recorded EBITDA improvement of 14% year-on-year (16% like-for-like) in the second quarter to Euro181m from Euro159m. In the first half, absolute improvement in EBITDA was also 14% higher (17% like-for-like) at Euro306m compared to Euro268m in 2012.
Looking towards the future, Lafarge expects cement growth in its markets of 0-3% in 2013 compared to 2012, factoring in low volumes in the first-half. Emerging markets continue to be the main driver of demand and Lafarge says that it will benefit from its 'well-balanced geographic spread of high-quality assets.'
The group also expects higher pricing in 2013 and that cost inflation will continue, although at a lower rate than in 2012. This, it says, will benefit from positive trends in coal and petcoke prices. The group targets to deliver additional EBITDA of Euro650m in the year through its performance and innovation measures.