Lafarge: First Half Results for the Six Months Ended June 30 2004
Paris (ots/PRNewswire)
- Sharp Increase in Results Driven by Overall Improved Markets and Strong Performance Management
- Operating income up 33% with sales increasing by 10%, on a like-for-like basis against a poor first half in 2003
- Strong growth of the net income
- Sharp increases in all Divisions
- Clear benefits of our geographic spread and strong presence in the emerging markets of Central and Eastern Europe, Mediterranean Basin, Africa and Asia
- Growth of operating income on ordinary activities for the full year 2004 expected to exceed 10%, excluding currency fluctuations
Group Financial Highlights
- Sales increased by 7%, and 10% on a like-for-like basis, to EUR6,794 million (2003: EUR6,350m)
- Operating income on ordinary activities up 31%, and 33% on a like-for-like basis, to EUR876 million (2003: EUR670m)
- Cash flow from operations increased by 47% to EUR903 million
- Net income increased strongly to EUR376 million (2003: EUR148), reflecting the overall improved operating performance and the decrease of net financial charges, which benefited from the substantial net debt reduction achieved in 2003
- Net income per share up to EUR2.3 (2003: EUR1.1)
Bernard Kasriel, Chief Executive Officer of Lafarge (Euronext: LG, NYSE: LR), said: "We are delighted with the widespread upturn in our results across all Divisions. Whereas we experienced a poor first half in 2003, we have seen more normal weather conditions in 2004 and increased construction activity in many of our major markets. In recent years, we have built a strong business mix with a well-balanced geographic spread including an extensive presence in growth markets. The quality of this portfolio together with strong performance management are behind the conversion of a 10% rise in sales into a 33% increase in operating income. We are well positioned for the future.
Our strong performance in the first half gives us confidence that the growth of our operating income on ordinary activities for 2004 should exceed 10%, excluding currency fluctuations and barring unusually bad weather conditions. This should be achieved against a continuing rise in energy costs and the strong performance of our business in the second half of last year."
Group Operating Highlights
- On a like-for-like basis, Group sales were up 10%, with improved sales in many regions, notably North America and Eastern Europe which had been weak in the first half of 2003. Operating income on ordinary activities increased by 33% on a like-for-like basis. This was principally due to strong volume growth across all Divisions and enhanced operational efficiency, particularly in Roofing and Gypsum.
- The Group operated in an overall favourable pricing environment. In many regions, price rises have been successfully implemented and contributed to the offsetting of increased energy and transportation costs. Cement prices in the Philippines recovered strongly, and price recovery is underway in Germany. Gypsum prices in the US increased sharply.
- In an environment of strong increases in fuel and freight prices, the Group has proved once again its expertise in containing the cement fuel costs, through fuel flexibility and purchasing power.
Group Operating Highlights by Division
(All % variances relate to operating income on ordinary activities on a like-for-like basis)
Cement: + 22% operating income, driven by price recovery in the Philippines and Germany, strong performance and excellent growth in emerging countries
- Operating income up 22% to EUR663 million
- In Western Europe, France, Spain and Greece showed good levels of performance, offsetting more subdued markets in Germany and the UK.
- Eastern Europe achieved a 70% increase in operating income, with growing volumes and favourable pricing trends more than offsetting fuel and power cost increases. Poland, Romania and Russia performed particularly well, with our new production line in Kujawy, Poland, helping to meet growing demand and improve performance. With strong positions within the European Union accession states and fully modernised and restructured operations, the Group demonstrates its ability to capture the upside of market growth.
- Operating income in the Mediterranean Basin and Africa-Indian Ocean increased respectively by 61% and 34%, driven by strong performance in Turkey, Jordan and Egypt in spite of cost pressures, and by significant growth in South Africa.
- In Asia, operating income was up 37%, underpinned by pricing recovery in the Philippines and volume and price uplift in India. Malaysia improved slightly its performance despite an unfavourable domestic market and higher energy costs. In South Korea, operating income was lower due to weaker market conditions and the higher cost of coal.
- In Latin America, operating income was slightly down, the significant recovery of results from Venezuela offsetting the decline in Brazil where market conditions were soft.
- In North America, operating income rose 38%, with stronger demand in most markets, the successful implementation of price increases and lower fixed costs. Growth in profitability was however dampened by higher volumes of cement imported to meet a surge in demand in some regions.
Aggregates and Concrete: + 57% operating income, with progress notably in North America and France
- Operating income up 57% to EUR91 million, with progress in most regions, notably North America, France and South Africa.
- The main drivers for increased operating income were strong growth in volumes for both aggregates and concrete and our ability to implement price increases successfully, contributing to improved profitability year-on-year.
- The lack of highway spending impacted the aggregates, asphalt and paving activities in the UK.
Roofing: + 87% operating income, benefiting from extensive restructuring and cost optimisation
- Operating income up 87% to EUR68 million, compared to low first half of 2003.
- Extensive restructuring of our operations since 1999, particularly in Germany, helped deliver much improved results despite a still difficult German market. Overall sustained reduction in costs was achieved through operational efficiency gains and a reduction in overheads.
- North America and Europe delivered strong operating income growth as a result of overall well-orientated markets, with the exception of Benelux, a contracting and very competitive market. Eastern Europe continued to show strong growth.
Gypsum: + 92% operating income, with strong improvement in North America
- Operating income up 92% to EUR74 million, with improved results in major regions except Germany.
- North American operations achieved a strong recovery with operating income up to EUR5 million from a loss of EUR -13 million in the first half of 2003, as a result of a more favourable pricing environment and improved operational efficiency, which enabled us to increase volumes by 9% compared to the first half of 2003.
- Western Europe, notably France, continued to deliver solid results with continuing improvement in performance.
- In other regions, operating income grew strongly up 69% to EUR23 million from EUR14 million in the first half of 2003, with a strong improvement in Poland.
Other Highlights
We pursue the strengthening of our financial structure, notably through our very selective investments policy.
Sustaining capital expenditure
- Sustaining capital expenditure totalled EUR257 million, relating to the ongoing upgrading of existing industrial operations around the world.
Investments in organic growth aimed at capacity increase and performance improvement
- Selective capacity expansion projects continue, in particular on: the building of a new production line in Bouskoura, Morocco to reinforce the plant's capacity and profitability, the doubling of the capacity in Chongqing and Dujiangyan plants, China, to meet the very strong growth of the local market, the building of a new cement plant in Hidalgo, Mexico to replace an existing high cost plant, and the building of a new cement plant in Bangladesh. These investments are expected to create value quickly, given their exposure to growth markets.
EUR291 million on high potential acquisitions
- Acquisitions during the first half totalled EUR291 million and included: the acquisition of the cement and ready-mix concrete assets of The Concrete Company of Colombus, in the South-East United States for EUR87 million, the acquisition of Hupfer, an aggregate and concrete ready-mix producer in France and Switserland for EUR69 million and the acquisition of a 10.2% stake in Lafarge Halla Cement in South Korea, to increase to 50.1% our percentage ownership. All acquisitions were selected for their synergies with our existing operations, and potential as a platform for further growth in new, attractive and profitable markets, as is consistent with Lafarge's long-term business strategy.
EUR70 million disposals of non-core assets
- The Group's portfolio of assets in each business division is constantly refined to ensure it fully fits with our strategy. Accordingly, during the six-month period the Group made EUR70 million of disposals through the divestment of several small non-core assets.
EUR612 million Eurobond exchange offer as part of Group debt management
- In July the Group successfully completed a Eurobond exchange offer as part of its ongoing active debt management. A total of EUR 560 million of existing bonds maturing in 2008 were exchanged against a new issue amounting to EUR 612 million and maturing in 2014. The transaction extended the average maturity of the debt with favourable market terms.
Outlook
- In most markets where the Group operates, we expect construction activity to remain at good levels in the second half of the year, which will compare to the strong levels of activity in the second half of last year.
- The overall pricing environment should remain favourable, with further price increases particularly in Cement and Gypsum in the US and in Cement in Germany, although some of these gains should be offset by continued pressure on energy and transportation costs.
- Our strong performance in the first half gives us confidence that the growth of our operating income on ordinary activities for 2004 should exceed 10%, excluding currency fluctuations and barring unusually bad weather conditions.
Consolidated accounts as at June 30, 2004
June 30, 2004 June 30, 2003 Variation
EUR Million EUR Million
Sales 6,794 6,350 + 7%
Operating income on ordinary 876 670 + 31%
activities
Net income 376 148 + 154%
Net income per share in EUR 2.3 1.1 + 100%
Cash flow from operations 903 616 + 47%
Group net debt 7,464 10,111 - 26%Lafarge, the world leader in building materials, holds top-ranking positions in all four of its Divisions: Cement, Aggregates & Concrete, Roofing and Gypsum. Lafarge employs 75,000 people in 75 countries and posted sales of EUR13.6 billion in 2003. Additional information is available on the web site at www.lafarge.com.
Lafarge's next financial publication - 2004 9 months sales - will be on October 22, 2004 (before the Euronext stock market opens.)
For release worldwide with simultaneous release in the United States.
Statements made in this press release that are not historical
facts, including statements regarding the level of construction
activity and pricing environment in the second half of 2004, as well
as our expected operating income, are forward-looking statements made
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. These statements are not guarantees of
future performance and involve risks, uncertainties and assumptions
("Factors"), which are difficult to predict. Some of the Factors that
could cause actual results to differ materially from those expressed
in the forward-looking statements include, but are not limited to:
the cyclical nature of the Company's business; national and regional
economic conditions in the countries in which the Group does
business; currency fluctuations; seasonal nature of the Company's
operations; levels of construction spending in major markets;
supply/demand structure of the industry; competition from new or
existing competitors; unfavourable weather conditions during peak
construction periods; changes in and implementation of environmental
and other governmental regulations; our ability to successfully
identify, complete and efficiently integrate acquisitions; our
ability to successfully penetrate new markets; and other Factors
disclosed in the Company's public filings with the French Autorite
des Marches Financiers and the US Securities and Exchange Commission
including its Reference Document and annual report on Form 20-F. In
general, the Company is subject to the risks and uncertainties of the
construction industry and of doing business throughout the world. The
forward-looking statements are made as of this date and the Company
undertakes no obligation to update them, whether as a result of new
information, future events or otherwise.Practical information:
There will be a French press conference at 09.00 CET at Lafarge (61 rue des Belles Feuilles - 75016 Paris).
There will be a French language analyst presentation at 11.00 CET at Lafarge at 61 rue des Belles Feuilles, 75116 Paris. The presentation document will be in English, the presentation will be in French and there will be a live translation into English. This presentation (including the slides) will also be available through a webcast facility on Lafarge website (www.lafarge.com) or at the following numbers:
- Dial in from France: +33-1-70-99-32-98
- Dial in from the UK: +44-208-400-6338
- Toll free from the UK: 0 800 2792 520
- Dial in from the US: +1-303-262-2130
- Toll free from the US: 800 218 0204Playback available online through www.lafarge.com or by phone from September 9, 2004 to September 16, 2004 at the following numbers:
- France playback number: +33-1-70-99-32-94 (pin code 132684#)
- UK playback number: +44-208-515-2499 (pin code 602325#)
- UK toll free number : 0-800-026-0020 (pin code 602325#)
- US toll free number: +800-405-2236 (pin code 11004517#)There will be a question and answer session at 17.00 UK time at The Lincoln Center, 18 Lincoln's Inn Fields, London WC2A 3ED which may also be available through a webcast facility on Lafarge website (www.lafarge.com) or at the following numbers:
- Dial in number from UK: +44-208-400-6303
- Toll free (from the UK only): 0-800-2792-520
- Dial in number from US: +1-303-262-2211
- Toll free (from the US only): 800 218 0530Playback facility available online through www.lafarge.com or by phone from September 9, 2004 to September 16, 2004 at the following numbers:
UK playback number: +44-208-515-2499 (code 602319#)
Toll free from the UK only: +0-800-026-0020 (code 602319#)
US playback number: +1-303-590-3000 (code 11004519#)
Toll free from the US only: +800-405-2236 (code 11004519#)Contact:
Communications: Stephanie Tessier: 33-1-44-34-92-32,
stephanie.tessier@lafarge.com, Philippe Hardouin:+33-1-44-34-11-71,
philippe.hardouin@lafarge.com. Investor Relations: James Palmer:
+33-1-44-34-92-93, james.palmer@lafarge.com, Daniele Daouphars:
+33-1-44-34-92-93, daniele.daouphars@lafarge.com