Exchange rates hit Lafarge

Third quarter sales at Lafarge were down 4% to €4,236 million, although the group has reported that they rose 4% on a like-for-like basis.

Its EBITDA (earnings before interest, taxes, depreciation and amortization) dropped 10% to €2,309 million – a fall of 3% on a like-for-like basis.

It said that volume trends improved month by month in the third quarter, sustained by ongoing growth in most emerging markets, the recovery in the US, and Europe stabilising at a low level.

It added, however, that the third quarter was marked by adverse exchange rates which had a negative impact of 7% on both sales – down €286 million – and EBITDA – down €67 million in the quarter.

It said that third quarter EBITDA grew 4% at constant scope and exchange rates, benefiting from a solid performance in the North American, Middle East/African and Asian regions.

For the first nine months, it claimed higher volumes, firm prices, and the acceleration of cost reductions and innovation measures generated a total of €470 million – €290 million from cost reductions and €180 million from innovation measures – and that the group was on track with its plans.

Lafarge confirmed its objective of delivering its 2012-to-2015 plan by the end of 2014, with at least €600 million of EBITDA coming from cost reduction and innovation measures in 2014.

It also revealed new objectives for beyond 2014 and plans to generate at least €1.1 billion of additional EBITDA from its actions in 2015 to 2016, of which €600 million would come from cost reductions and €500 million from innovation. It said this represented a minimum objective of €550 million per annum.

Bruno Lafont, chairman and CEO of Lafarge, said, “With improving volume trends and despite the adverse effect of exchange rates, we continued to progress in the third quarter on our strategic action plan.

“We have reduced net debt by more than €1 billion compared to September last year, and our cost reduction and innovation actions delivered results in line with our 2013 objectives.”

He went on, “Looking ahead, we will benefit from three organic growth drivers – continuing growth in emerging countries, accelerating growth through innovation and progressive recovery in mature markets.

“We will capture this potential thanks to our high-quality and well-spread portfolio of assets, and to our competitive edge in innovation which ensures the development of a value-added offer of products and services to address the evolving needs of our customers.

“All our measures strive towards growth in sales, cash flows and returns, and our priority is to create sustainable value for our shareholders,” he said.

Overall, Lafarge said it saw cement growth in its markets of between 0 and 3% in 2013 versus 2012. This implied better trends in the second half compared to the first, it said, as market recovery was becoming evident in the US, growth in most emerging markets continued, and Europe was showing stabilisation at a low level.

It expected higher pricing for the year. It reported continuing cost inflation, although at a lower rate than in 2012, benefiting from positive trends in coal and petcoke prices, and reduced general inflation in developed countries.

The group said its target was to deliver additional EBITDA of €650 million in 2013 through its cost reduction and innovation measures.