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Lafarge sees brighter year after 2009 profit sags

Lafarge sees brighter year after 2009 profit sags
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First Published: Fri, Feb 19 2010. 03 49 PM IST
Updated: Fri, Feb 19 2010. 03 49 PM IST
Paris: The world’s biggest cement maker Lafarge expects global demand to rise up to 5% in 2010 after posting a steeper-than-expected fall in 2009 earnings as the economic crisis hit construction activities.
The economic decline in the United States and Europe in 2009 led to a drop in construction projects and a subsequent fall in cement demand while building activities in emerging markets remained strong.
The French group on Friday reported a 30% fall in profit from continuing operations to €2.8 billion ($3.80 billion), far below a €16.4 billion mean estimate in a Thomson Reuters I/B/E/S poll, on sales down 17% to €15.884 billion.
“2010 is presenting itself more favourably than 2009 for Lafarge,” chief executive Bruno Lafont told a conference call with reporters.
“This year, we will have a more balanced growth, with a stabilisation in developed countries compared to the decline (in 2009), and also the continuing growth in all emerging countries.”
The group proposed a dividend of €2 per share.
Lafarge shares were down 2.91% at €49.30 at 0858 GMT. They have have lost 12% since 1 January, after gaining more than 53% in 2009.
Analysts at Oddo said the results were below expectations, with the US and central Europe the main disappointments, and the outlook was cautious. Oddo maintained its “buy” rating, saying Lafarge was trading below its historic multiples.
Lafarge said after what had been a “challenging year”, it expected global cement demand in its markets to increase between 0% and 5% in 2010.
In 2009, global cement demand rose some 6%, thanks to an infrastructure boom in China, which offset the slump in the construction sector in Europe and the United States.
Emerging market strength
“Emerging markets continue to show strength and Lafarge forecasts that cement volumes in these markets will continue to drive demand in 2010,” the group said.
“For developed markets, the group expects that demand will start to recover slowly during the second half of the year.”
In November, Chief Executive Bruno Lafont warned that a recovery would have to wait till the second half of 2010, especially in mature markets like the United States, although emerging markets like China could come back sooner.
The group’s net income fell a worst-than-expected 54%, to €736 million, while the poll of 18 analysts showed a consensus of €1.006 billion.
Its current operating margin was down to 15.6% from 18.6%.
In the fourth quarter, the group had a net loss of €38 million after one-off items, which included impairment losses on some cements assets in western Europe and the settlement of the USG litigation. In 2008, the group had a net profit before one-off items of €40 million.
Under an agreement announced last December, Lafarge agreed to pay American building group USG some $80 million in 2009 and another $25 million before the end of 2010.
Without these one-off elements, Lafarge’s net income fell 67% to €98 million during the last three months of 2009 compared with €293 million the previous year.
Lafarge said it would sell assets in the range of €300 million to €500 million this year.
Its net debt was reduced to €3.09 billion at the end of 2009.
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First Published: Fri, Feb 19 2010. 03 49 PM IST