Lafarge to accelerate cost cuts, lower debt

Following the implementation of its new organisation, Lafarge has announced its 2012 to 2015 plan to cut costs by EUR1.3bn over the next four years and bring its net debt below EUR10bn as early as possible next year. The group is targeting a return on capital of more than eight per cent in 2015.

Bruno Lafont, Chairman and Chief Executive Officer of Lafarge, said in a statement: "The plan we are presenting today will quickly drive higher returns for our shareholders, significantly strengthen our financial structure, and shows our clear leadership ambition.

“Our main growth avenue in the coming years will clearly be to extract maximum value from our current asset positions. During the recent past we have built a balanced portfolio of high quality assets weighted to growth markets. We will penetrate these markets more deeply by addressing the changing needs of customers by introducing new innovative products, new construction solutions, and higher levels of service.  Also, through productivity improvements and less intensive capital expenditures, we expect to generate higher returns from these existing positions.  ??“While we anticipate a demanding economic environment, we are confident that the actions we are taking will help drive sales, cash flows and returns."

The program is targeted to add at least €450m cumulative additional EBITDA for the four years from 2012 through 2015.

Higher energy savings through alternative fuels, increased savings from new programs to manage electricity, and productivity improvements represent some of the areas of acceleration. “We have targeted a cumulative €1300m in savings for the four years from 2012 through 2015. Of the total, at least €400m of savings are planned for 2012 and at least €350m for 2013,” the statement said.

Sales growth will come from extracting more value from its existing markets. Lafarge is accelerating the introduction of innovative products, solutions, and services to meet these needs. 

The group also plans less intensive capital spending. “Accelerated performance productivity actions and higher use of cementitious products are expected to bring an additional 13 to 15Mt of additional output from existing plants with minimal capital expenditures. Our positions also allow us to create growth through more capital efficient brownfield projects,” the group said. ??All these actions will contribute to higher cash generation, improved returns, and cash flow from operations to net debt of 28% to 30% no later than 2015.