Lafarge sales down on 1Q weather effect, confirms 2013 goals

Lafarge reported a six per cent decline in sales in the three months to the end of March as it was impacted by harsh winter weather conditions and production issues in Algeria and Egypt. However, the group said its performance and innovations targets remain on track and the company is on course to achieve its net reduction goal of less than EUR10bn this year.

First-quarter volumes were notably affected by a particularly long winter in Europe and North America, together with a high 2012 comparable base and two less trading days on average. A 10-day production stoppage in Algeria in March (which has now been resolved) and gas supply shortages in Egypt also compounded the issue.

Consolidated sales were down four per cent at constant scope and exchange rates, as increased prices across all of Lafarge’s product lines partly offset the declines in volumes.

EBITDA declined by 19 per cent with performance and innovation actions and improved pricing mitigating the impact of lower volumes and cost inflation. No carbon credit sales in Q1 2013 (compared to CO2 proceeds of €22m in 1Q12), was offset by a one-time €20m gain linked to management's decision to review pension commitments in North America. The net loss in the period was EUR117m compared with EUR60m a year earlier.

Goals on track

The group’s performance and innovation actions delivered €100m EBITDA in the quarter, on track with its 2013 target of €650m. Bruno Lafont, Chairman and Chief Executive Officer of Lafarge, said: I am confident that by the end of 2014 we will have delivered most of our 2012-15 plan to generate €1.75bn additional EBITDA through performance and innovation measures, close to one year ahead of our initial objective.

Net debt was EUR11.8bn at the end of the 1Q13. This figure was EUR0.6bn less than compared to the first quarter of last year but slightly higher than year-end 2012 due to seasonal working capital needs.  With the most recent divestment of its plant in Ukraine to CRH, Lafarge has secured EUR1bn of disposals since 1 January 2012 to cut its debt. “We will also reduce net debt to below €10bn as soon as possible in 2013," Mr Lafont added. Capital expenditures will be limited initially to €800m in 2013.

Outlook unchanged

The group remains unchanged on its outlook for the year and still expects to see demand growth in its markets of 1-4 per cent in 2013.

Emerging markets continue to be the main driver of demand and the group said it will continue investing in core markets. This includes the debottlenecking or brownfield projects in emerging markets such as in India or Iraq as well as investments in North America to fully benefit from the upturn in this market, with notably the expansion project of our Exshaw plant near Calgary and the renovation of its Ravena plant in northeast US which supplies the New York market.

Lafarge also expects price increases initiated to address cost inflation to “fully deliver in the coming months."